We show that reaching for yield---a tendency to take more risk when the real interest rate declines while the risk premium remains constant---results from imposing a sustainable spending constraint on an otherwise standard infinitely lived investor with power utility. When the interest rate is...

We use data on Indian stock portfolios to show that return heterogeneity is the primary contributor to increasing inequality of wealth held in risky assets by Indian individual investors. Return heterogeneity increases equity wealth inequality through two main channels, both of which are related...

This chapter reviews the behavior of financial asset prices in relation to consumption. The chapter lists some important stylized facts that characterize U.S. data, and relates them to recent developments in equilibrium asset pricing theory. Data from other countries are examined to see which...

The covariance between US Treasury bond returns and stock returns has moved considerably over time. While it was slightly positive on average in the period 1953--2009, it was unusually high in the early 1980''s and negative in the 2000''s, particularly in the downturns of 2000--02 and 2007--09....

Over the period 1975 to 2005, the US dollar (particularly in relation to the Canadian dollar) and the euro and Swiss franc (particularly in the second half of the period) have moved against world equity markets. Thus these currencies should be attractive to risk-minimizing global equity...

We build a cross-sectional factor model for investors' direct stockholdings, by analogy with standard time-series factor models for stock returns. We estimate the model using data from almost 10 million retail accounts in the Indian stock market. We find that stock characteristics such as firm...