We investigate the determinants of a household's decision on whether to invest in risky financial assets. Financial theory suggests that with increasing labor income risk, the reluctance of households to hold stocks increases. We propose to measure income risk as the observed variation of...

Investors utility has been mathematically modeled at 1738 by Daniel Bernoulli as an attempt to capture investors preferences to lottery outcomes. Ever since the analysis of decision making under uncertainty has again become a major focus of interest. Kahneman and Tversky in 1979 suggested a more...

This paper extends the methodology developed in Chien, Cole and Lustig (2011 & 2012) (hereafter CCL2011 and CCL2012, respectively) to analyze and compute the equilibria of economies with heterogeneous agents who have different asset trading technologies and are subject to both aggregate and...