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Rare events and annuity market participation

Lopes, Paula and Michaelides, Alexander (2007) Rare events and annuity market participation. Finance Research Letters, 4 (2). pp. 82-91. ISSN 1544-6123

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Identification Number: 10.1016/


We investigate whether a rare event (like the default of the annuity provider) can explain the annuity market participation puzzle. High risk aversion is needed to change behavior in the presence of such a disastrous shock but higher risk aversion also makes annuities more valuable. Therefore, these rare events are unlikely candidates to explain the low take-up of voluntary annuities: the conclusion is robust to disentangling risk aversion from intertemporal substitution and to allowing portfolio investment in a stock market index.

Item Type: Article
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Additional Information: © 2007 Elsevier
Divisions: Financial Markets Group
Subjects: H Social Sciences > HB Economic Theory
JEL classification: H - Public Economics > H0 - General > H00 - General
D - Microeconomics > D9 - Intertemporal Choice and Growth > D91 - Intertemporal Consumer Choice; Life Cycle Models and Saving
G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice; Investment Decisions
E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Employment, and Investment > E21 - Macroeconomics: Consumption; Saving; Aggregate Physical and Financial Consumer Wealth
Date Deposited: 12 May 2008 13:53
Last Modified: 16 May 2024 00:40

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