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We study the relationship between compensation and risk-taking among finance firms using a neglected insight from principal-agent contracting with hidden action and risk-averse agents. If the sensitivity of pay to stock price or slope does not vary with stock price volatility, then total...
Persistent link: https://www.econbiz.de/10013094549
In most countries, many of the largest corporations are controlled by large shareholders. We show that, under reasonable assumptions, this stylized fact implies that portfolio holdings of U.S. investors should exhibit a home bias in equilibrium. We construct an estimate of the world portfolio of...
Persistent link: https://www.econbiz.de/10012755951
against non-diversifiable labor income risk. We then use our our theory to link openness to trade to the level of …
Persistent link: https://www.econbiz.de/10012775835
This paper analyzes optimal portfolio decisions of long-horizon investors with undiversifiable labor income risk and exogenous expected retirement and lifetime horizons. It shows that the fraction of savings optimally invested in stocks is unambiguously larger for employed investors than for...
Persistent link: https://www.econbiz.de/10012788168
is small. And the size of uninsurable wage risk is small because firms provide substantial wage insurance …
Persistent link: https://www.econbiz.de/10012978096
Using panel data for nearly 1,000 companies during 1991 to 2000, this paper documents that the average share of participant's discretionary 401(k) contributions in company stock was almost 20 percent, and then relates this share to plan design features and firm financial characteristics. We find...
Persistent link: https://www.econbiz.de/10012787121
We propose a model where investors hire fund managers to invest either in risky bonds or in riskless assets. Some … managers have superior information on the default probability. Looking at the past performance, investors update beliefs on … their managers and make firing decisions. This leads to career concerns which affect investment decisions, generating a …
Persistent link: https://www.econbiz.de/10012757530
Transaction costs in trading involve both risk and return. The return is associated with the cost of immediate execution and the risk is a result of price movements during a more gradual trading. The paper shows that the trade-off between risk and return in optimal execution should reflect the...
Persistent link: https://www.econbiz.de/10012761661
Persistent link: https://www.econbiz.de/10000122474
Persistent link: https://www.econbiz.de/10003645082