We analytically show that a common across rich/poor individuals Stone-Geary utility function with subsistence consumption in the context of a simple two-asset portfolio-choice model is capable of qualitatively and quantitatively explaining: (i) the higher saving rates of the rich, (ii) the...

We show that preferred investment styles can be determined by the big five personality traits. Using this result, we build a tool that recommends investment styles. The resulting recommendations are significantly higher rated than random recommendations.We collected detailed personality traits...

This paper reports the results of a behavioural finance experiment on the ability of Thai individuals to make informed investment decisions under a defined contribution self-management option. Using an asset allocation dataset from members of the Thai Government Pension Fund (TGPF) and a control...

The extant literature regarding the effects of housing on stock investment shows inconsistent findings, either positive or negative effects have been reported. This paper investigates the mechanisms by which housing affects household stock investment through a structure equation model (SEM)....

It has been argued that rare economic disasters can explain most asset pricing puzzles. If this is the case, perceived risk associated with a disaster in stock markets should be revealed in household portfolios. That is, the framework that solves these pricing puzzles should also generate...

This paper investigates whether false confidence, as characterized by a high level of personal mastery and a low level of intelligence (IQ), results in frequent investor trading and subsequent investor wealth erosion across time. Using the National Longitudinal Survey (NLSY79), change in wealth...

The last 30 years saw substantial increases in wealth inequality and in stock market participation, smaller increases in consumption inequality and the fraction of indebted households, a decline in interest rates and in the expected equity premium, as well as a prolonged stock market boom....

This paper develops a tractable asset pricing framework based on an Arrow Debreu economy with heterogeneous agents. The assumption of heterogeneity recasts the market rather than aggregate consumption as the key element for pricing securities. The model expresses some asset pricing relationships...

Using the Michigan Survey of Consumers, we provide evidence that consumers' beliefs about current and future aggregate durable expenditure predict expected returns. We rationalize this finding through an asset pricing model with recursive preferences over non-durable and durable goods and belief...

We derive the equilibrium interest rate and risk premiums using recursive utility with heterogeneity in a continuous time model. We solve the associated sup-convolution problem, and obtain explicit closed form solutions. The heterogeneous two-agent model is calibrated to the data of Mehra and...