Suppose that a group of agents having divergent expectations can share risks efficiently. We examine how this group should behave collectively to manage these risks. We show that the beliefs of the representative agent is in general a function of the group.s wealth level, or equivalently, that...

We analyze the worst currency carry loss episodes in recent decades, including causes, attribution by currency, timing, and the duration of carry drawdowns. To explore the determinants of the length of carry losses, a model of carry drawdown duration is estimated. We find evidence that drawdown...

We study the interplay between tenure decisions, stock market investment and the public social security system. Housing equity not only serves a dual purpose as a consumption good and as an asset, but also provides insurance to buffer various risks in retirement. Our life cycle model captures...

This paper considers the problem of model uncertainty in the case of multi-asset volatility models and discusses the use of model averaging techniques as a way of dealing with the risk of inadvertently using false models in portfolio management. In particular, it is shown that under certain...

This paper considers a simple model of credit risk and derives the limit distribution of losses under different assumptions regarding the structure of systematic and idiosyncratic risks and the nature of firm heterogeneity. The theoretical results obtained indicate that if firm-specific risk...

How to incorporate hard-to-measure assets into the wealth tax? We analyze the effect of an optimal wealth tax on risk-taking behavior and welfare when investors do not only have the standard portfolio choice with a well-diversified market portfolio, but can alternatively choose to invest all...

This paper analyses the short- and long-term effects of geopolitical uncertainty on cross-border portfolio flows between the US and 41 developed and emerging economies over the period January 1992-November 2022. We find that geopolitical uncertainty decreases equity inflows from other countries...

This paper examines how providing better information to customs inspectors and monitoring their actions affects tax revenue and fraud detection in Madagascar. First, an instrumental variables strategy is used to show that transaction-specific, third-party valuation advice on a subset of...