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This article studies the behavior of an individual who can repeatedly alternate between two occupations. Such a career option is analogous to an exotic derivative security: an American reset option. Despite infinite opportunities to change occupations, an individual faced with mobility costs is...
Persistent link: https://www.econbiz.de/10012729498
Target-date funds are designed with some level of investment risk that declines over time as the target retirement date approaches. It is possible to design a safe target-date fund in terms of market risk — although in terms of meeting a target level of wealth at retirement (or income in...
Persistent link: https://www.econbiz.de/10012937152
We study orders of risk and model uncertainty aversion in the smooth ambiguity model proposed by Klibanoff, Marinacci, and Mukerji (2005). We consider a quadratic approximation of their model and we show that both risk and model uncertainty attitudes have at most a second order effect....
Persistent link: https://www.econbiz.de/10011081545
This paper studies two frequently observed portfolio behaviors that are seemingly inconsistent with rational portfolio choice. The first is the tendency of workers and entrepreneurs to hold their company's stock. The second is the propensity of workers to limit their equity holdings through...
Persistent link: https://www.econbiz.de/10010729240
We build a market equilibrium theory of asset prices under Knightian uncertainty. Adopting the mean-variance decisionmaking model of Maccheroni, Marinacci, and Ruffino (2013a), we derive explicit demands for assets and formulate a robust version of the two-fund separation theorem. Upon market...
Persistent link: https://www.econbiz.de/10010784143
Persistent link: https://www.econbiz.de/10011026277
This paper studies two frequently observed portfolio behaviors that are seemingly inconsistent with rational portfolio choice. The first is the tendency of workers and entrepreneurs to hold their company's stock. The second is the propensity of workers to limit their equity holdings through...
Persistent link: https://www.econbiz.de/10010548097
We derive the analogue of the classic Arrow-Pratt approximation of the certainty equivalent under model uncertainty as defined by the smooth model of decision making under ambiguity of Klibanoff, Marinacci and Mukerji (2005). We study its scope via a portfolio allocation exercise that delivers a...
Persistent link: https://www.econbiz.de/10008752205
We study orders of risk and model uncertainty aversion in the smooth ambiguity model proposed by Klibano, Marinacci, and Mukerji [4]. We consider a quadratic approximation of their model and we show that both risk and model uncertainty attitudes have at most a second order effect. Specifically,...
Persistent link: https://www.econbiz.de/10009018978
Persistent link: https://www.econbiz.de/10010119130