How does household portfolio diversification vary with financial sophistication and advice?

Economic theory suggests that households should invest their financial wealth in a combination of cash and a well-diversified equity portfolio. Yet, many households' equity investments are strongly concentrated in a few assets. Attempts to explain this discrepancy have included low levels of cognitive skills and/or financial knowledge; and poor or misguided financial advice. In order to investigate these claims empirically, I construct detailed portfolios for the respondents to a Dutch household survey. The data allow me to estimate the portfolios' risk-return properties without resorting to assumptions about characteristics of specific asset classes. Controlling for a large number of covariates, my results show that the combination of low numerical-financial skills and not seeking advice from other persons is strongly associated with the largest losses from underdiversification, whereas financial knowledge does not seem to have much of an effect.

Surprises in a Growing Market Niche

High replacement rates from public old age insurance might lead to the belief that little room is left for private sector annuities in Germany. Taking a closer look, we find a small market with a surprisingly large variety of products. Due to the recent pension reform and future ones to come the market is projected to grow substantially in the upcoming years. This paper describes the available annuity contracts and determines their money’s worth for different subgroups of the population.

Mandatory unisex policies and annuity pricing: quasi-experimental evidence from Germany

We analyse the effect of abolishing gender-based categorisation of risks on the pricing of annuity contracts. Under the absence of screening activities, we find clear evidence of insurers expecting strong adverse selection effects. In particular, most of the unisex contracts’ payouts closely resemble those from women’s policies before the reform. Hence the policy target is not met and there are large efficiency losses for men. We conclude that there seems to be little hope for unisex policies to meet their equity objectives if consumers can react on the extensive margin, unless subsidies are extremely large.

Lifetime Earnings and Life Expectancy

We estimate remaining life expectancy at age 65 using a very large sample of male German pensioners. Our analysis is entirely nonparametric. Furthermore, the data enable us to compare life expectancy in eastern and western Germany conditional on a measure of socio-economic status. Our findings show a lower bound of almost fifty percent (six years) on the difference in remaining life expectancy between the lowest and the highest socio-economic group considered. Within groups, we find similar values for East and West. Our analysis contributes to the literature in several aspects. First, Germany is clearly underrepresented in differential mortality studies. Second, we are able to use a novel measure of lifetime earnings as a proxy for socio-economic status that remains valid for retired people. Third, the comparison of eastern and western Germany may provide some interesting insights for transformation countries.

Mandatory Unisex Policies And Annuity Pricing: Quasi-Experimental Evidence From Germany

We analyse the effect of abolishing gender-based categorisation of risks on the pricing of annuity contracts. Under the absence of screening activities, we find clear evidence of insurers expecting strong adverse selection effects. In particular, most of the unisex contracts’ payouts closely resemble those from women’s policies before the reform. Hence the policy target is not met and there are large efficiency losses for men. We conclude that there seems to be little hope for unisex policies to meet their equity ob jectives if consumers can react on the extensive margin, unless subsidies are extremely large.

Lifetime earnings and life expectancy

We estimate remaining life expectancy at age 65 using a very large sample of male German pensioners. Our analysis is entirely nonparametric. Furthermore, the data enable us to compare life expectancy in eastern and western Germany conditional on a measure of socio-economic status. Our findings show a lower bound of almost fifty percent (six years) on the difference in remaining life expectancy between the lowest and the highest socio-economic group considered. Within groups, we find similar values for East and West. Our analysis contributes to the literature in several aspects. First, Germany is clearly underrepresented in differential mortality studies. Second, we are able to use a novel measure of lifetime earnings as a proxy for socio-economic status that remains valid for retired people. Third, the comparison of eastern and western Germany may provide some interesting insights for transformation countries.Germany, life expectancy, pensioners, socio-economic differentials

Differential mortality by lifetime earnings in Germany

e estimate mortality rates by a measure of socio-economic status in a very large sample of male German pensioners aged~65 or older. Our analysis is entirely nonparametric. Furthermore, the data enable us to compare mortality experiences in eastern and western Germany conditional on socio-economic status. As a simple summary measure, we compute period life expectancies at age~65. Our findings show a lower bound of almost 50 percent (six years) on the difference in life expectancy between the lowest and the highest socio-economic group considered. Within groups, we find similar values for the former GDR and western Germany. Our analysis contributes to the literature in three aspects. First, we provide the first population-based differential mortality study for Germany. Second, we use a novel measure of lifetime earnings as a proxy for socio-economic status that remains applicable to retired people. Third, the comparison between eastern and western Germany may provide some interesting insights for transformation countries.comparison East and West Germany, lifetime earnings measure, mortality and socio-economic status

Surprises in a Growing Market Niche - An Evaluation of the German Private Annuities Market

High replacement rates from public old age insurance might lead to the belief that little room is left for private sector annuities in Germany. Taking a closer look, we find a small market with a surprisingly large variety of products. Due to the recent pension reform and future ones to come the market is projected to grow substantially in the upcoming years. This paper describes the available annuity contracts and determines their money’s worth for different subgroups of the population.

The Impact of Income Shocks on Health: Evidence from Cohort Data

We study the effect of permanent income innovations on health for a prime-aged population. Using information on more than half a million individuals sampled over a twenty-five year period in three different cross-sectional surveys we aggregate data by date-of-birth cohort to construct a ’synthetic cohort’ dataset with details of income, expenditure, socio-demographic factors, health outcomes and selected risk factors. We then exploit structural and arguably exogenous changes in cohort incomes over the eighties and nineties to uncover causal effects of permanent income shocks on health. We find that such income innovations have little effects on health, but do affect health behaviour and mortality.

The impact of income shocks on health: evidence from cohort data

We study the effect of permanent income innovations on health for a prime-aged population. Using information on more than half a million individuals sampled over a twenty-five year period in three different cross-sectional surveys we aggregate data by date-of-birth cohort to construct a 'synthetic cohort' dataset with details of income, expenditure, socio-demographic factors, health outcomes and selected risk factors. We then exploit structural and arguably exogenous changes in cohort incomes over the eighties and nineties to uncover causal effects of permanent income shocks on health. We find that such income innovations have little effects on health, but do affect health behaviour and mortality.