Aditya Lakhina

Project Description:

In retirement planning literature, consumption and savings are two key variables. The spending pattern and the savings change over time, depending on one’s health, needs, social life and economy – when investors do well in the market, they tend to consume more and save less, the opposite occurs when the markets are doing poorly. The existing models usually assume either a constant consumption pattern or a constant savings pattern. Therefore it is very important to use more realistic models for these two dependent variables. Another important feature for the consumption rate and savings that has not been widely investigated in the literature is mean reversion – consumption and savings cannot increase indefinitely, they must be stationary and therefore can be modeled as mean reverting variables. This project’s goal will be to collect any available data about consumption habits and savings for Canadian households, and investigate their different properties and their dependence. The findings can be used to calibrate the theoretical consumption and savings models and link them to real-life patterns. The project will use statistical tools and will require strong quantitative background.

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