This paper investigates the dynamics of individual portfolios in a unique dataset containing the disaggregated wealth of all households in Sweden. Between 1999 and 2002, we observe little aggregate rebalancing in the financial portfolio of participants. These patterns conceal strong...

Major events often trigger abrupt changes in stock prices and volatility. We study the implications of jumps in prices and volatility on investment strategies. Using the event-risk framework of Duffie, Pan, and Singleton (2000), we provide analytical solutions to the optimal portfolio problem....

Recent research has shown that rich' households save at much higher rates than others (see Carroll (2000); Dynan, Skinner, and Zeldes (1996); Gentry and Hubbard (1998); Huggett (1996); Quadrini (1999)). This paper documents another large difference between the rich and the rest of the...

While the Sharpe ratio is still the dominant measure for ranking risky assets, a substantial effort has been made over the past three decades to find a way to account for non-Normally distributed risks. This paper derives a generalized ranking measure which, under a regularity condition,...

This paper studies optimal taxation of entrepreneurial capital with private information and multiple assets. Entrepreneurial activity is subject to a dynamic moral hazard problem and entrepreneurs face idiosyncratic capital risk. We first characterize the optimal allocation subject to the...

Do bond investors demand credit quality or liquidity? The answer is both, but at different times and for different reasons. Using data on the Euro-area government bond market, which features a unique negative correlation between credit quality and liquidity across countries, we show that the...

We estimate risk aversion from the actual financial decisions of 2,168 investors in Lending Club (LC), a person-to-person lending platform. We develop a methodology that allows us to estimate risk aversion parameters from each portfolio choice. Since the same individual makes repeated...

We investigate the portfolio choices of mean-variance-optimizing investors who use sample evidence to update prior beliefs centered on either risk-based or characteristic-based pricing models. With dogmatic beliefs in such models and an unconstrained ratio of position size to capital, optimal...

The effect of uninsured labor income risk on the joint saving/portfolio composition decision is analyzed using new techniques from the theory of multiple risk-bearing. Applying this analysis, the effect of labor income taxes on the demand for risky securities is considered. It is well known that...

We view sustainability as a requirement that welfare should not be expected to decline over time. We impose this requirement as a prior constraint on the consumption-savings-investment problem, and study its implications for saving, risky investment, and the social discount rate. The constraint...