Rare events and annuity market participation
Lopes, P.
& Michaelides, A.
(2005).
Rare events and annuity market participation.
(Financial Markets Group Discussion Papers 553).
Financial Markets Group, The London School of Economics and Political Science.
& Michaelides, A.
(2005).
Rare events and annuity market participation.
(Financial Markets Group Discussion Papers 553).
Financial Markets Group, The London School of Economics and Political Science.
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.