Overconfidence is a widely documented phenomenon. Empirical evidence reveal two types of overconfidence in financial markets: investors both overestimate the average rate of return to their assets and underestimate uncertainty associated with the return. This paper explores implications of...

Nearly all life-cycle models adopt Yaari's (1965) assumption that individuals know the survival probabilities that they face. Given that an individual's exact survival probabilities are likely unknown, we explore the implications of relaxing this assumption. If there is no annuity market, then...

This paper studies the role of production risk in the capital structure of firms. I create an equilibrium economy with an entrepreneur who operates a firm that engages in risky production activities and a household who acts as an investor. The firm raises capital by issuing stocks and bonds to...

This paper studies the role of production risk in the capital structure of firms. I create a general equilibrium economy with an entrepreneur who operates a firm that engages in risky production activities and a household who acts as an investor. The firm raises capital by issuing stocks and...