Journal Article

Household Portfolio Choices in Taxable and Tax-Deferred Accounts: Another Puzzle?

Gene Amromin

in Review of Finance

Volume 7, issue 3, pages 547-582
Published in print December 2003 | ISSN: 1572-3097
Published online December 2003 | e-ISSN: 1573-692X | DOI: https://dx.doi.org/10.1023/B:EUFI.0000022154.18119.07
Household Portfolio Choices in Taxable and Tax-Deferred Accounts: Another Puzzle?

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This paper provides a survey of existing literature on portfolio allocations in conventional and tax-deferred investment habitats. A long-standing puzzle in this literature has been the dissonance between the theoretical prediction of tax-efficient portfolio choices and observed portfolio allocations. I clarify this prediction and offer a different perspective by emphasizing the importance of uninsurable labor income risk and restrictions on accessibility of tax-deferred assets. I identify the key factors in dual-habitat portfolio decisions and highlight the necessary ingredients for producing non-tax-efficient, or precautionary, allocations. JEL classification codes: D12, G11, H24.

Keywords: household portfolio choice; precautionary savings; tax-efficiency

Journal Article.  0 words. 

Subjects: Financial Law ; Financial Institutions and Services ; Financial Markets

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