Urvi Neelakantan

For Better or Worse: Financial Decision-Making Behavior of Married Couples

This study constructs a theoretical model of household bargaining to explain the financial decision-making behavior of married couples. We empirically test our model using data from the 2000 Health and Retirement Study (HRS). The HRS is unique among national data sets in that it identifies the primary decision-maker and the more financially knowledgeable spouse. It also includes detailed information on the individual retirement accounts (IRAs) of both the husband and the wife. Using this information, we estimate a series of regression models to investigate how decision making and bargaining power affect whether a couple owns an IRA, how much they invest in it, and whether they allocate it to mostly stocks. In general, the results show that, when the husband has more decision-making power than the wife or the decision-making power is about equal, the couple is more likely to own an IRA and to have a larger amount invested in an IRA. Furthermore, the account is more likely to be allocated to mostly stocks when the husband is the financially knowledgeable spouse. Traditional measures of bargaining power also were significant in all of our models, even after we controlled for decision making. The findings have important implications for educators and financial practitioners and provide insight into the importance of having both the husband and wife actively involved in making financial decisions.

College or the Stock Market, or College and the Stock Market?

In this note, we document facts about the relationship between stock market participation and a predominant form of human capital investment -- formal higher education. We examine, using the Survey of Consumer Finances (SCF), the relationship between stock market participation and college enrollment and completion, with attention to the presence or absence of student loan debt.

Stock Market Investment: The Role of Human Capital

Portfolio choice models counter factually predict (or advise) almost universal equity market participation and a high share for equity in wealth early in life. Empirically consistent predictions have proved elusive without participation costs, informational frictions, or non standard preferences. We demonstrate that once human capital investment is allowed, standard theory predicts portfolio choices much closer to those empirically observed. Two intuitive mechanisms are at work: For participation, human capital returns exceed financial asset returns for most young households and, as households age, this is reversed. For shares, risks to human capital limit the households desire to hold wealth in risky financial equity.

Gender and Marital Differences in Wealth and Investment Decisions: Implications for Researchers, Financial Professionals, and Educators

Wealth is an important source of financial well-being and investment is an important vehicle to accumulate wealth. A large body of literature has focused on analyzing the systematic differences in wealth and investment behavior across gender and marital states. This paper provides a broad overview of the extant research and its implications for researchers, financial professionals, and educators.