This paper investigates the efficiency of household investment decisions in a unique dataset containing the disaggregated wealth and income of the entire population of Sweden. The analysis focuses on two main sources of inefficiency in the financial portfolio: underdiversification of risky...

We draw a straight line connecting financial shocks, capital investment decisions by firms, and change in measured aggregate productivity using a dynamic general equilibrium model. Data shows that post the 2008 crisis, firms changed their allocation between assets of varying depreciation rates...

We study how the introduction of carbon taxes in a closed economy propagate in a credit portfolio and precisely describe how carbon taxes dynamics affect the firm value and credit risk measures such as probability of default, expected and unexpected losses.We adapt a stochastic multisectoral...

This paper studies a novel approach for managing macroeconomic volatility in developing countries based upon dynamic portfolio optimisation. As part of this study, we develop a sovereign risk management model in the context of an Asset-Liability Management (ALM) framework. First, we solve the...

This paper studies a novel approach for managing macroeconomic volatility in commodity exporting countries. As part of this study, we develop a sovereign risk management model in the context of an Asset-Liability Management (ALM) framework. Our first contribution is an extension of the...

Hedge fund managers are subject to several non-linear incentives: (a) performance fee options (call); (b) equity investor's redemption options (put); (c) prime broker contracts allowing for forced deleverage (put). The interaction of these option-like incentives affects optimal leverage ex-ante,...

Robinhood (RH) investors increased their holdings in the March 2020 COVID bear market, indicating an absence of collective panic and margin calls. This steadfastness was rewarded in the subsequent bull market. Despite unusual interests in some “experience” stocks (e.g., cannabis stocks),...

Using German and US brokerage data we find that investors are more likely to sell speculative stocks trading at a gain. Investors' gain realizations are monotonically increasing in a stock's speculativeness. This translates into a high disposition effect for speculative and a much lower...

Loss aversion has been shown to be an important driver of people’s investment decisions. Encouraged by regulators, financial institutions are in search of ways to incorporate clients’ loss aversion in their risk classifications. The most critical obstacle appears to be the lack of a valid...

Research in psychology shows that people miscalibrate their ability and often incorrectly perceive themselves as above (overconfident) or below average. Previous measures that proxy for overconfidence focus on perceptions about knowledge pertaining to economic conditions and financial markets...