Using a representative sample of Italian investors, we estimate the risk associated with pension benefits by eliciting for each individual the subjective distribution of the replacement rate as a summary indicator of social security wealth. We find substantial heterogeneity of pension risk and...

Rational investors perceive correctly the value of financial information. Investment in information is therefore rewarded with a higher Sharpe ratio. Overcon.dent investors overstate the quality of their own information, and thus attain a lower Sharpe ratio. We contrast the implications of the...

In this paper we focus on poor financial literacy as one potential factor explaining lack of portfolio diversification. We use the 2007 Unicredit Customers' Survey, which has indicators of portfolio choice, financial literacy and many demographic characteristics of investors. We first propose...

Using information on a large sample of retail investors and experimental data we find that risk aversion and risk ambiguity are correlated: individuals who dislike risk also dislike ambiguity. We show that what links these traits is the way people handle decisions. Intuitive thinkers are less...

We use survey data to study American households‘ propensity to default when the value of their mortgage exceeds the value of their house even if they can afford to pay their mortgage (strategic default). We find that 26% of the existing defaults are strategic. We also find that no household...

When firms borrow from multiple concentrated creditors such as banks they appear to differentiate their allocation of borrowing. In this paper, we put forward hypotheses for this borrowing pattern based on incomplete contract theories and test them using a sample of small U.S. firms. We find...

This paper studies the costs of adjusting employment, distinguishing between firms’ firing and workers’ mobility costs. We construct a simple dynamic general equilibrium model of labor demand and supply and show that only the joint response of employment and wages to firm level shocks can...

We contrast two potential explanations of the substantial di¤erences in entrepreneurial activity observed across geographical areas: entry costs and external effects. We extend the Lucas model of entrepreneurship to allow for heterogeneous entry costs and for externalities that shift the...

To explain the extremely long-term persistence (more than 500 years) of positive historical experiences of cooperation (Putnam, 1993), we model the intergenerational transmission of priors about the trustworthiness of others. We show that this transmission tends to be biased toward excessively...

I provide a test of narrow framing to explain why individuals turn down small positive expected value lotteries. Participants in a large survey have been asked whether they would accept a small lottery of winning 180 euros with probability of 1/2 or losing 100 euros with the same probability. To...