Showing 1 - 10 of 67
While the existence of fixed costs in entering asset markets is the leading rationalization of the "participation puzzle" -the fact that most households do not hold stocks, despite the diversification gains and the significant risk-premium involved-, most motivations of these fixed costs are as...
Persistent link: https://www.econbiz.de/10005699623
Bubbles are generally considered the outcome of investor irrationality or informational asymmetry, both objectionable in efficient markets with rational investors. We introduce an Intertemporal-CAPM with market clearing between high- and low-risk-averse rational investors who learn the CAPM...
Persistent link: https://www.econbiz.de/10005702759
I develop a Markov model of samrt money chasing past winning funds while taking into account associated costs. The model also allows market capital entry and exit. The steady-state capital allocations re derived using constant transition probabilities. The results sugget that down side risk is...
Persistent link: https://www.econbiz.de/10005086415
This paper explores the quantitative impact of the Baby Boom on stock and bond returns. It constructs a neoclassical growth model with overlapping generations, in which agents make a portfolio decision over risky capital and safe bonds in zero net supply. The model has exogenous technology and...
Persistent link: https://www.econbiz.de/10005328938
In this article we construct a model in which agents exhibit preference for ownership with respect to a durable (house). Ownership is modeled as a continuous function of debt service normalized by the price of the house. We study the utility optimization problem of an investor not endowed with...
Persistent link: https://www.econbiz.de/10005328956
Myopic loss aversion has been used to explain why a high equity premium might be consistent with plausible levels of risk aversion. The intuition is that it plays the role of high risk aversion in portfolio choice. But if so, should these agents not perceive larger gains from international...
Persistent link: https://www.econbiz.de/10005699617
We use household data to estimate the cost of participating to financial markets and the cross sectional dispersion of stock market optimism. Our analysis is based on a mean-variance framework, within which we derive structural decision rules for individual composition of the risky assets...
Persistent link: https://www.econbiz.de/10005699630
Money managers are rewarded for increasing the value of assets under management, and predominantly so in the mutual fund industry. This gives the manager an implicit incentive to exploit the well-documented positive fund-flows to relative-performance relationship by manipulating her risk...
Persistent link: https://www.econbiz.de/10005699668
This paper proposes a model encompassing alternative views of contagion by highlighting the different channels of transmission of financial crises in an unifying framework. We study investor behaviour when they are affected by external habit formation. It is shown how international portfolio...
Persistent link: https://www.econbiz.de/10005702724
We show that a model of the spirit of capitalism can generate a high degree of international risk sharing as measured by the discount-factor-based approach of Brandt, Cochrane, and Santa-Clara (2001), even when consumption and portfolio holdings exhibit "home bias". We also show how portfolio...
Persistent link: https://www.econbiz.de/10005702731