Capital income inequality is large and growing fast, accounting for a significant portion of total income inequality. We study its growth in a general equilibrium portfolio choice model with endogenous information acquisition and heterogeneity across household sophistication and asset riskiness....

What contributes to the growing income inequality across U.S. households? We develop an information- based general equilibrium model that links capital income derived from financial assets to a level of investor sophistication. Our model implies income inequality between sophisticated and...

We show that capital income inequality is large and growing fast, accounting for a significant portion of total income inequality. We study its determinants in a general equilibrium portfolio choice model with endogenous information acquisition and heterogeneity across household sophistication...

What contributes to the growing income inequality across U.S. households? We develop an information- based general equilibrium model that links capital income derived from financial assets to a level of investor sophistication. Our model implies income inequality between sophisticated and...

We provide new empirical evidence suggesting that the marginal investor in mutual funds behaves differently across market conditions. If the marginal investor allocates capital across mutual funds rationally, then the relative performance of funds should be unpredictable. We find however that...

We provide novel evidence that mutual fund returns are predictable after periods of high market returns but not after periods of low market returns. The asymmetric conditional predictability in relative performance cannot be fully explained by time-varying differences in transaction costs, in...