Assumptions about the dynamic and distributional behavior of risk factors are crucial for the construction of optimal portfolios and for risk assessment. Although asset returns are generally characterized by conditionally varying volatilities and fat tails, the normal distribution with constant...

We test whether asymmetric preferences for losses versus gains as in Ang, Chen, and Xing (2006) also affect the pricing of cash flow versus discount rate news as in Campbell and Vuolteenaho (2004). We construct a new four-fold beta decomposition, distinguishing cash flow and discount rate betas...

Arbitrageurs with a short investment horizon gain from accelerating price discovery by advertising their private information. However, advertising many assets may overload investors' attention, reducing the number of informed traders per asset and slowing price discovery. So arbitrageurs...

Assumptions about the dynamic and distributional behavior of risk factors are crucial for the construction of optimal portfolios and for risk assessment. Although asset returns are generally characterized by conditionally varying volatilities and fat tails, the normal distribution with constant...

We take a simple time-series approach to modeling and forecasting daily average temperature in U.S. cities, and we inquire systematically as to whether it may prove useful from the vantage point of participants in the weather derivatives market. The answer is, perhaps surprisingly, yes....

Using life-history survey data from eleven European countries, we investigate whether childhood conditions, such as socioeconomic status, cognitive abilities and health problems influence portfolio choice and risk attitudes later in life. After controlling for the corresponding conditions in...

This paper addresses the open debate about the usefulness of high-frequency (HF) data in large-scale portfolio allocation. Daily covariances are estimated based on HF data of the S&P 500 universe employing a blocked realized kernel estimator. We propose forecasting covariance matrices using a...

The direct financial impact of the financial crisis has been to deal a heavy blow to investment-based pensions; many workers lost a substantial portion of their retirement saving. The financial sector implosion produced an economic crisis for the rest of the economy via high unemployment and...

We analytically show that a common across rich/poor individuals Stone-Geary utility function with subsistence consumption in the context of a simple two-asset portfolio-choice model is capable of qualitatively and quantitatively explaining: (i) the higher saving rates of the rich, (ii) the...

This paper examines data on financial sophistication among the U.S. older population, using a special-purpose module implemented in the Health and Retirement Study. We show that financial sophistication is deficient for older respondents (aged 55+). Specifically, many in this group lack a basic...