This paper analyzes the optimal investment strategy for loss averse investors, assuming a complete market and general Ito processes for the asset prices. The loss-averse investor follows a partial portfolio insurance strategy. When the investor's planning horizon is short (less than 5 years), he...

The empirically documented Pareto wealth distribution at high wealth levels implies rather extreme wealth inequality. Is this inequality primarily due to differential talent, or is it due to luck? The answer to this question has profound political, social, and philosophical implications, as well...