Abstract
AbstractThis article studies individuals' optimal decisions on consumption, life insurance, and stock purchases in a one‐period framework. With exponential utility functions, individuals' life insurance and stock purchases are independent of each other; life insurance purchases are affected only by individuals' future income, bequest intensity, risk attitude, survival probability, and the insurance risk premium; stock purchases are affected only by individuals' risk attitude, the risk‐free rate of return, the stock return, and stock volatility. With power utility functions, life insurance and stock purchases are positively related with each other and are affected by all the factors.
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