Showing 1 - 10 of 60
If an individual with expected utility and a reasonable level of wealth rejects a small actuarially favorable gamble, it implies a very high degree of risk aversion. It also predicts (counterfactually) the rejection of more sizable and very attractive bets. If additional background uncertainty...
Persistent link: https://www.econbiz.de/10010613059
We examine the impact of heterogeneity in preferences on asset prices in a setting where agents have rank-dependent expected utility. Endogenous limits to risk sharing arise naturally, with the more risk averse agents choosing to exit the market for the risky asset. This leads to economically...
Persistent link: https://www.econbiz.de/10012735339
We calibrate a life-cycle model with uninsurable labour income risk and borrowing constraints to match wealth accumulation and portfolio allocation profiles of direct and indirect stockholders in both taxable and tax-deferred accounts. Tax-deferred accounts generate an increase in wealth...
Persistent link: https://www.econbiz.de/10005504781
Persistent link: https://www.econbiz.de/10005397332
Persistent link: https://www.econbiz.de/10011081992
The empirical pricing kernels estimated from index options are non-monotone (Rosenberg and Engle, 2002; Bakshi, Madan, and Panayotov, 2010) and the corresponding risk-aversion functions can be negative (Aït-Sahalia and Lo, 2000; Jackwerth, 2000). We show theoretically that these and several other...
Persistent link: https://www.econbiz.de/10011039209
We solve and estimate a life-cycle model with earnings risk and liquidity constraints in the presence of tax-deferred retirement accounts (TDAs). We explicitly consider two very different types of households (with TDAs): direct and indirect stockholders. The latter hold stocks only through TDAs...
Persistent link: https://www.econbiz.de/10004985612
When capital market is imperfect, an entrepreneur has to invest substantial personal funds to start a firm and has to bear large firm-specific risk. Furthermore, if a typical entrepreneur is risk averse, private equity should earn a premium for idiosyncratic risk. In this paper I explore the...
Persistent link: https://www.econbiz.de/10005085623
We calibrate a life-cycle model with uninsurable labor income risk and borrowing constraints to match wealth accumulation and portfolio allocation profiles of direct and indirect stockholders in both taxable and tax-deferred accounts. Tax-deferred accounts generate an increase in wealth...
Persistent link: https://www.econbiz.de/10005706260
This article explores the implications of additive and endogenous habit formation preferences in the context of a life-cycle model of an investor who has stochastic uninsurable labor income. To solve the model, I analytically derive the habit-wealth feasibility constraints and show that they...
Persistent link: https://www.econbiz.de/10005564206