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Economic Brief

Feb. 15, 2017

Richmond Fed Researchers Explore How Couples Allocate Their Household Portfolios

The Richmond Fed’s latest Economic Brief helps reconcile economic theory with empirical studies on how households invest their wealth.

The classical theory predicts that the share of household wealth invested in risky assets, such as stocks, should be independent of the level of wealth. In reality, however, wealthier households do invest a larger share of their wealth in risky assets. The Richmond Fed essay suggests a modification to the theoretical framework, explicitly treating the household as two individuals with potentially different levels of risk aversion and bargaining power. In this framework, the household does indeed invest a greater share in risky assets as its wealth increases.

The Richmond Fed’s Economic Brief series provides web-exclusive essays on current economic issues and trends. Sign up to receive an email notification when a new essay is posted.

As part of our nation’s central bank, the Richmond Fed is one of 12 regional Reserve Banks working together with the Board of Governors to support a healthy economy and deliver on our mission to foster economic stability and strength. We connect with community and business leaders across the Fifth Federal Reserve District—including the Carolinas, District of Columbia, Maryland, Virginia, and most of West Virginia—to monitor economic conditions, address issues facing our communities, and share this information with monetary and financial policymakers. We also work with banks to ensure they are operating safely and soundly, supply financial institutions with currency that’s fit for distribution, and provide a safe and efficient way to transfer funds through our nation’s payments system.


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