This paper shows that the framework proposed by Barberis and Huang (2009) to incorporate narrow framing and loss aversion into dynamic models of portfolio choice and asset pricing can be extended to also account for probability weighting and for a value function that is convex on losses and...

We study optimal securitization of defaultable assets in a continuous time setting. A financial intermediary can create a portfolio of defaultable assets and then sell it to outside investors. The default risk of the assets in the portfolio is determined by the unobservable costly effort exerted...

Barber and Odean (2000) find that households who trade more have a lower net return than others and attribute this pattern to irrationality, particularly overconfidence. In contrast, we find that household financial choices generated from a dynamic optimization problem with rational agents and...

The direct financial impact of the financial crisis has been to deal a heavy blow to investment-based pensions; many workers lost a substantial portion of their retirement saving. The financial sector implosion produced an economic crisis for the rest of the economy via high unemployment and...

This paper develops a model showing that people who have flexibility in choosing how much to work will prefer to invest substantially more of their money in risky assets than if they had no such flexibility. Viewed in this way, labor supply flexibility offers insurance against adverse investment...

We investigate optimal consumption, asset accumulation and portfolio decisions in a realistically calibrated life-cycle model with flexible labor supply. Our framework allows for wage rate uncertainly, variable labor supply, social security benefits and portfolio choice over safe bonds and risky...

This paper examines the effect of the labor-leisure choice on portfolio and consumption decisions over an individual's life cycle. The model incorporates the fact that individuals may have considerable flexibility in varying their work effort (including their choice of when to retire). Given...

Reference-dependent preference models assume that agents derive utility from deviations of consumption from benchmark levels, rather than from consumption levels. These references can be either backward-looking (as explicit in the Habit literature) or forward-looking (as implicitly suggested by...

The aim of this study is to examine whether securitized real estate returns reflect direct real estate returns or general stock market returns using international data for the U.S., U.K., and Australia. In contrast to previous research, which has generally relied on overall real estate market...