Abstract
A significant portion of U.S. households enters and exits investment accounts. Empirically, income and wealth changes are related to these transitions, with income changes not affecting the retired. We find that a life-cycle model with participation costs cannot match the observed ownership dynamics. An extension with a stock-market crash fits better the average participation rate and the ownership transitions of the middle-aged and retired, but not the ownership dynamics of the young, which is better captured by a model with elevated income risk. Overall, across the life-cycle, ownership transitions respond to wealth shocks in both model and data.
| Original language | English |
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| Journal | Management Science |
| Publication status | Accepted/In press - 2024 |