Stock holdings over the life cycle: Who hesitates to join the market?

In this paper, we study the empirical relationship between age and individual wealth held in stocks, focusing on the heterogeneity of risk-taking over the life cycle in the population. We use micro-data and nonparametric quantile regression to argue that there is a pronounced life cycle pattern of risk-taking for households, which is conditional upon ownership. Specifically, we show that the fraction of stock investment decreases to bottom significantly in midlife and increases afterwards, contradicting the popular evidence claiming a hump-shaped pattern. The pressure of large financial obligations during middle age may be the reason for the crowding out of stock market risk-taking and could induce low capital returns for households.