This paper examines the influence of both trust and sociability on stock market participation and their implications for international differences in stockholding. Using data from the Survey of Health, Ageing and Retirement in Europe supplemented with information on regional trust from the World...

This paper proposes a structural approach to long-horizon asset allocation. In particular, the investor draws inferences about asset returns from a vector autoregression (VAR) with economic restrictions on the intercept, slope, and covariance matrix implied by the long-run risk model of Bansal...

We analyze the inflation-hedging properties of US stocks, bonds, and T-bills at the subindex level during the 1983 – 2012 period, for investment horizons between 1 month and 10 years. Bonds other than T-bills turn out poor inflation hedges during the entire sample period, regardless 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 develop a dynamic valuation model of private equity (PE) investments by solving the portfolio-choice problem for a risk-averse investor (LP), who invests in a PE fund, managed by a general partner (GP). Key features are illiquidity, leverage, GP value-adding skills (alpha), and compensation,...

We test the relation between ambiguity aversion and five household portfolio choice puzzles: non-participation in equities, low allocations to equity, home-bias, own-company stock ownership, and portfolio under-diversification. In a representative U.S. household survey, we measure ambiguity...

We solve for optimal consumption and portfolio choice in a life-cycle model with short-sales and borrowing constraints, undiversifiable labor income risk and a predictable, time-varying, equity premium and show that the investor pursues aggressive market timing strategies. Importantly, in the...

Stocks with large increases in call implied volatilities over the previous month tend to have high future returns while stocks with large increases in put implied volatilities over the previous month tend to have low future returns. Sorting stocks ranked into decile portfolios by past call...

We introduce a robust investment strategy to hedge long dated liabilities under model misspecification and incomplete bond markets. A robust agent who worries about misspecified bond premia follows a min-max expected shortfall criterion to protect against model uncertainty. We employ a backward...

There is a persistent association between health and portfolio choice, but hardly anything is known about the underlying sources of heterogeneity: what makes healthier individuals hold more risky assets? This paper uses rich Dutch longitudinal data to take into account and explain unobserved...