Household financial decisions over the life-cycle

Abstract

The purpose of this thesis is to examine the household decisions making process in order to maximize their welfare converge at some risks for economic environment has become more volatile than in the past and conditions deteriorate sharply, particularly in times of financial crisis. For these reasons, we focus on the role of governments and the legal framework as well as privatization movements and the role of information in order to protect households. Households finance deserves a prominent place in the field of financial economics which requires not only finance and economics but further knowledge about psychology, sociology, industrial organization and the law. Furthermore, households' financial accounts, balance sheet and income statement, may provide several important insights about the risks related to them and how these factors interact with the wealth accumulation of households units. Maintaining a well diversified portfolio enables households to mitigate risks related mainly to liquidity, investment horizon, inflation sensitivity, regulation, tax and accounting considerations as well as unique needs. The main concern of households is the ability to maintain a satisfying amount for their future needs. For this reason we present two applications: inflation- indexed bonds, more specifically TIPS and private funded pension funds.