We study the dynamic general equilibrium of an economy where risk averse shareholders delegate the management of the firm to risk averse managers. The optimal contract has two main components: an incentive component corresponding to a non-tradable equity position and a variable 'salary'...

We reexamine the issue of executive compensation within a general equilibrium production context. Intertemporal optimality places strong restrictions on the form of a representative manager's compensation contract, restrictions that appear to be incompatible with the fact that the bulk of many...

In an exchange economy with endowment inequality, we investigate how preferences with external habits affect the equity risk premium. We show that the dynamics of external additive habits with wealth inequality are complex when a background risk is present. It is ambiguous whether wealth...

We study gender differences in risk-taking investment strategies in Defined Contribution (DC) Plans with the help of data from the US Federal Reserve Board's Survey of Consumer Finances (SCF). By DC plans, we refer not only to employer-sponsored plans such as 401(k)s and 403(b)s, but also to...

We study the impact of financial literacy on financial risk preference. When financial literacy is measured jointly by actual and self-assessed scores, we find compelling evidence of a valley-shaped relationship between actual financial literacy and risk preference. At a given level of...

Recent studies have found unmeasured intangible capital to be large and important.In this paper we observe that by nature intangible capital is also very different from physical capital. We find it plausible to argue that the accumulation process for intangible capital differs significantly from...