The correspondence between the demand for capital and various measures of Tobin’s q often is tenuous (Abel and Blanchard 1986; Hayashi 1982), at times even perverse. Among the possible explanations for this apparent challenge to the q theory of investment, this paper considers the consequences of...

Within optimal investment programs, the accumulation of capital is a stable function of marginal q. Much of the interest in q, however, derives from its potential to reflect the demand for capital when the optimal program changes. If the marginal return on capital diminishes as capital...

This paper assesses the effects of insurance and capital requirements on assets' equilibrium returns in a capital-asset-pricing model in which intermediaries possess better information than the public about the yields on a set of assets. Equilibrium returns depend on two risk premiums that...

A substantial literature has developed models of optimal consumption and asset allocation based on the assumption that stocks and bonds have fixed returns, with normal independent, identically distributed disturbances. Households optimally rebalance from stocks to bonds as they age, reflecting...

Beginning this year, people can convert all or a portion of their traditional IRA balances into Roth IRAs. Although this new allowance for conversions applies explicitly to traditional IRAs, it also applies indirectly to balances in 401(k) plans that workers hold with former employers. These old...

Despite the recovery of the stock market since the financial crisis, many retirees have seen significant reductions in their wealth relative to pre crisis expectations and substantial declines in investment income due to very low short-term interest rates. What really matters, though, is the...

This study calculates the impact of federal income taxes on the progressivity of the Old Age and Survivors Insurance (OASI) program. It uses the Health and Retirement Study (HRS) data linked with the Social Security Earnings Records to estimate OASI contributions and benefits for individuals and...

Increasingly, people are depending on 401(k) and similar defined contribution plans sponsored by their employers for their retirement income. As a result, participants in these plans also are paying more of their plans’ costs, ranging from administration and sales expenses to the cost of...