Understanding the dynamics of high dimensional non-normal dependency structure is a challenging task. This research aims at attacking this problem by building up a hidden Markov model (HMM) for Hierarchical Archimedean Copulae (HAC), where the HAC represent a wide class of models for high...

There is an apparent rift between the way banks calculate and the way humans think.On the one hand, exponential discounting has played a centuries-long, lead role in financial analysis. On the other hand, experiments by behavioral economists demonstrate that hyperbolic discounting is better than...

Innovations in statistical technology have sparked concerns about distributional impacts across categories such as race and gender. Theoretically, as statistical technology improves, distributional consequences depend on how changes in functional forms interact with cross-category distributions...

Taxes on capital gains are deferred until realization, whereas dividend taxes are levied upon accrual. This often makes dividends tax-disadvantaged relative to share repurchases, which leads to the payout puzzle: why do firms pay dividends? This paper develops a model of corporate payout policy...

The question of optimal presentation format and choice architecture for investment decisions has gained momentum among researchers, policy makers, and practitioners alike. Motivated by the question how to provide information to investors in a way to improve financial decision-making, we conduct...

We find that financial decision-making power per se is significant in explaining individuals’ objective risk-taking behavior and subjective risk attitude. More importantly, we show that this decision power attenuates the correlation between subjective risk attitude and objective risk taking....

We study optimal life-cycle portfolio allocation and its application to target-date fund (TDF) design. We show that optimal TDF allocation must be explicitly linked to a savings rate; for example, a higher savings rate generating higher financial wealth accumulation should necessarily come with a...

I provide evidence that adverse shocks to the wealth of business owners during the Financial Crisis had large effects on their firms' financing, employment, and investment. I use individual-level portfolio data from Norway to exploit the dispersion in stock returns during 2008–09 as a source...

We propose debt-wealth constraints to separate all households into constrained and unconstrained groups. A constrained household is subject to debt payment dues with limited wealth. However, an unconstrained family has cash reserves. Since cash reserves can absorb investment losses, only...

This paper explores the feasibility of calculating absolute poverty lines on the basis of minimum food expenditures in developed countries. It makes three important contributions. First, it demonstrates that standard statistical methods used in the developing world deliver either inadequate...