We investigate inattention on the part of pension plan participants using a novel dataset covering savings in Sweden's Premium Pension System, data that permit direct comparison of the investment behaviors of pension and retail mutual fund investors. Unlike retail mutual fund investors, pension...

We develop a liability driven investment framework that incorporates downside risk penalties for not meeting liabilities. The shortfall between the asset and liabilities can be valued as an option which swaps the value of the endogenously determined optimal portfolio for the value of the...

We present a model of optimal allocation to liquid and illiquid assets, where illiquidity risk results from the restriction that an asset cannot be traded for intervals of uncertain duration. Illiquidity risk leads to increased and state-dependent risk aversion, and reduces the allocation to...

We recover a forward-looking distribution of expected abnormal returns (alphas)for active equity mutual funds from analyst ratings. Professional analysts believe thatalphas are dispersed, that the average fund will underperform, and that the largestfunds will outperform. We estimate a rational...

Past trends in fundamentals linked to economic activity and inflation predict currency returns. We find that a trading strategy that goes long currencies with strong economic momentum and short currencies with weak economic momentum exhibits an annualized Sharpe ratio of 0.70 and yields a...

We characterize the optimal default fund in a defined contribution (DC) pension plan. Using detailed data on individuals' holdings inside and outside the pension system, we find substantial heterogeneity within and between passive and active investors in terms of labor income, financial wealth,...

We characterize the optimal default fund in a defined contribution (DC) pension plan. Using detailed data on individuals and their holdings inside and outside the pension system, we find substantial heterogeneity among default investors in terms of labor income, financial wealth, and stock...

We examine the portfolio choice of an investor with generalized disappointment-aversion preferences who faces log returns described by a normal-exponential model. We derive a three-fund separation strategy: the investor allocates wealth to a risk-free asset, a standard mean-variance efficient...

We examine the daily activity and performance of a large panel of individual investors in Sweden's Premium Pension System in the period 2000 to 2010. We find that active investors outperform passive investors, and that there is a causal effect of fund changes on performance. Chosen funds...

We examine the daily activity and performance of a large panel of individual investors in Sweden's Premium Pension System. We find that active investors earn significantly higher returns and risk-adjusted returns than inactive investors. A performance decomposition analysis reveals that most of...