NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Asset Accumulation, Information, and the Life Cycle

Mervyn A. King, Jonathan I. Leape

NBER Working Paper No. 2392
Issued in September 1987
NBER Program(s):   ME

Empirical tests of the life cycle model have focused on its implications for the level of a household's total net worth and paid little attention to changes in portfolio composition over the life cycle. In this paper, we examine a new survey of the asset holdings of 6,010 U.S households and show that there is a pronounced life-cycle pattern to both the number and value of assets held by U.S. households. Direct survey evidence suggests that incomplete information is a significant determinant of household portfolio composition. We test the hypothesis that information about investment opportunities arrives stochastically over time, estimating a Poisson model for the arrival of new information.

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Document Object Identifier (DOI): 10.3386/w2392

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