A multivariate technique called principal component analysis is used to combine measures of human development. The first principal component index is the linear combination of component indexes with maximal information content. This multivariate technique accounts for differences in the...

Empirical evidence suggests that it may cost time, effort, and resources to properly implement a saving plan, though such cost may differ across individual consumers. We document seven facts on macroeconomic consumption and saving over the life cycle, and we enrich a simple life-cycle model by...

Overconfidence is a widely documented phenomenon. In this paper, we study the implications of consumer overconfidence in a life-cycle consumption/saving model. Our main analytical result is a necessary and sufficient condition under which any degree of overconfidence concerning the mean return...

A multivariate technique called principal component analysis is used to combine measures of human development. The first principal component index is the linear combination of component indexes with maximal information content. This multivariate technique accounts for differences in the...

The principal contribution of this paper is the linking together of separate control problems across multiple generations using the bequest motive, intergenerational altruism, rational expectations, and solution boundary conditions. We demonstrate that discounting at the market rate of interest...

Overconfidence is a widely documented phenomenon. Empirical evidence reveal two types of overconfidence in financial markets: investors both overestimate the average rate of return to their assets and underestimate uncertainty associated with the return. This paper explores implications of...