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D'Albis, Hippolyte
and Thibault, Emmanuel
(2012)
Ambiguous Life Expectancy and the Demand for Annuities.
TSE Working Paper, n. 12-323, Toulouse
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Abstract
In this paper, ambiguity aversion to uncertain survival probabilities is
introduced in a life-cycle model with a bequest motive to study the optimal demand
for annuities. Provided that annuities return is sufficiently large, and notably when
it is fair, positive annuitization is known to be the optimal strategy of ambiguity
neutral individuals. Conversely, we show that the demand for annuities decreases with
ambiguity aversion and that there exists a finite degree of aversion above which the
demand is non positive: the optimal strategy is then to either sell annuities short or
to hold zero annuities if the former option is not available. To conclude, ambiguity
aversion appears as a relevant candidate for explaining the annuity puzzle.
| Item Type: | Monograph (Working Paper) |
|---|---|
| Language: | French |
| Date: | July 2012 |
| Place of Publication: | Toulouse |
| JEL Classification: | D11 - Consumer Economics - Theory D81 - Criteria for Decision-Making under Risk and Uncertainty G11 - Portfolio Choice; Investment Decisions G22 - Insurance; Insurance Companies |
| Subjects: | B- ECONOMIE ET FINANCE |
| Divisions: | TSE-R (Toulouse) |
| Institution: | Université Toulouse 1 Capitole |
| Site: | UT1 |
| Date Deposited: | 09 Jul 2014 17:27 |
| Last Modified: | 02 Apr 2021 15:47 |
| OAI Identifier: | oai:tse-fr.eu:26056 |
| URI: | https://publications.ut-capitole.fr/id/eprint/15355 |
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