Investing Retirement Wealth: a Life-Cycle Model
If household portfolios are constrained by borrowing and short-sales restrictions asset markets, then alternative retirement savings systems may affect household welfare by relaxing these constraints....
View ArticleStock Market Mean Reversion and the Optimal Equity Allocation of a Long-Lived...
This paper solves numerically the intertemporal consumption and portfolio choice problem of an infinitely-lived investor who faces a time-varying equity premium. The solutions we obtain are very...
View ArticleInvesting Retirement Wealth: A Life-Cycle Model
If household portfolios are constrained by borrowing and short-sales restrictions, or by fixed costs of participating in risky asset markets, then alternative retirement savings systems may affect...
View ArticlePortfolio Choice and Trading Volume with Loss Averse Investors
This paper presents a formal model of portfolio choice and stock trading volume with loss-averse investors. The demand function for risky assets is discontinuous and non-monotonic: as wealth rises...
View ArticlePortfolio Choice with Internal Habit Formation: A Life-Cycle Model with...
Motivated by the success of internal habit formation preferences in explaining asset pricing puzzles, we introduce these preferences in a life-cycle model of consumption and portfolio choice with...
View ArticleLife-Cycle Asset Allocation: A Model with Borrowing Constraints, Uninsurable...
We study life-cycle asset allocation in the presence of liquidity constraints and undiversifiable labor income risk. The model includes three different assets (cash, long-term government bonds and...
View ArticleExploiting Short-Run Predictability
This paper measures the utility gains from exploiting short-run predictability in stock returns in the presence of transaction costs, short-selling constraints and parameter uncertainty. We consider...
View ArticleStock Market Mean Reversion and the Optimal Equity Allocation of a Long-Lived...
This paper solves numerically the intertemporal consumption and portfolio choice problem of an infinitely-lived investor who faces a time-varying equity premium. The solutions we obtain are very...
View ArticleOptimal Life-Cycle Asset Allocation: Understanding the Empirical Evidence
We show that a life-cycle model with realistically calibrated uninsurable labor income risk and moderate risk aversion can simultaneously match stock market participation rates and asset allocation...
View ArticlePortfolio Choice with Internal Habit Formation: A Life-Cycle Model with...
Motivated by the success of internal habit formation preferences in explaining asset-pricing puzzles, we introduce these preferences in a life-cycle model of consumption and portfolio choice with...
View ArticleAggregate Implications of Defined Benefit and Defined Contribution Systems
We use a general equilibrium life-cycle model with incomplete markets and heterogeneous agents to evaluate the macroeconomic and welfare implications of Defined Benefit (DB) versus Defined Contribution...
View ArticleOptimal Savings with Taxable and Tax-Deferred Accounts
We use a calibrated life-cycle model with earnings risk and liquidity constraints to study the role of tax-deferred retirement accounts (TDAs) in life cycle savings behavior. We find that they promote...
View ArticleLending Relationships in the Interbank Market
This paper is an empirical study of lending relationships among banks in the interbank market. We use a unique data set to construct a dynamic measure of relationships, namely the intensity of trading...
View ArticleWealth Accumulation and Portfolio Choice with Taxable and Tax-Deferred Accounts
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...
View ArticleOptimal Life-Cycle Asset Allocation: Understanding the Empirical Evidence
We show that a life-cycle model with realistically calibrated uninsurable labor income risk and moderate risk aversion can simultaneously match stock market participation rates and asset allocation...
View ArticleThe Excess Burden of Government Indecision
Governments are known for procrastinating when it comes to resolving painful policy problems. Whatever the political motives for waiting to decide, procrastination distorts economic decisions relative...
View ArticleThe Excess Burden of Government Indecision
Governments are known for procrastinating when it comes to resolving painful policy problems. Whatever the political motives for waiting to decide, procrastination distorts economic decisions relative...
View ArticleOptimal Life-Cycle Investing with Flexible Labor Supply: A Welfare Analysis...
We investigate optimal consumption, asset accumulation and portfolio decisions in a realistically calibrated life-cycle model with flexible labor supply. Our framework allows for wage rate uncertainly,...
View ArticleAsset Pricing with Limited Risk Sharing and Heterogeneous Agents
We solve a model with incomplete markets and heterogeneous agents that generates a large equity premium, while simultaneously matching stock market participation and individual asset holdings. The high...
View ArticleAsset Pricing with Limited Risk Sharing and Heterogeneous Agents
We develop a model with incomplete markets and heterogeneous agents that generates a large equity premium, while simultaneously matching stock market participation and individual asset holdings. The...
View ArticleQuantifying the Distortionary Fiscal Cost of ‘The Bailout’
We utilize an overlapping generations model with endogenous production and incomplete markets to quantify the distortionary costs associated with financing the increase in government expenditures...
View ArticleQuantifying the Distortionary Fiscal Cost of 'The Bailout'
We utilize an overlapping generations model with endogenous production and incomplete markets to quantify the distortionary costs associated with financing the increase in government expenditures...
View ArticleLongevity Risk, Retirement Savings and Financial Innovation
Over the last couple of decades there have been unprecedented, and to some extent unexpected, increases in life expectancy which have raised important concerns for retirement savings and for the...
View ArticleLongevity Risk, Retirement Savings, and Financial Innovation
Over the last couple of decades there have been unprecedented increases in life expectancy which have raised important concerns for retirement savings. We solve a life-cyclemodel with longevity risk,...
View ArticleRisk and Returns to Education
We analyze the returns to education in a life-cycle framework that incorporates risk preferences, earnings volatility (including unemployment), and a progressive income tax and social insurance system....
View ArticleRisk and Returns to Education
We analyze the returns to education in a life-cycle framework that incorporates risk preferences, earnings volatility (including unemployment), and a progressive income tax and social insurance system....
View ArticleLife-Cycle Portfolio Choice with Liquid and Illiquid Assets
Traditionally, quantitative models that have studied households' portfolio choices have focused exclusively on the different risk properties of alternative financial assets. We introduce differences in...
View ArticleRisk and Returns to Education Over Time
We model education as an investment in human capital that, like other investments, is appropriately evaluated in a framework that accounts for risk as well as return. In contrast to dominant...
View ArticleTactical Target Date Funds
We show that saving for retirement in target date funds (TDFs) modified to take advantage of predictability in excess returns driven by the variance risk premium generates economically large welfare...
View ArticleTactical Target Date Funds
We propose target date funds modified to exploit stock return predictability driven by the variance risk premium. The portfolio rule of these tactical target date funds (TTDFs) is extremely simplified...
View ArticleDo Robots Increase Wealth Dispersion?
We document significant negative effects of exposure to increased automation at work on household wealth accumulation. Beyond the income and savings channels, we uncover a novel mechanism contributing...
View ArticleRetirement Savings Adequacy in U.S. Defined Contribution Plans
We evaluate retirement savings adequacy using a large panel of U.S. workers with a 401(k) account. We model medical expenditures, longevity, investment risk, and the likelihood of withdrawals due to...
View ArticleEvidence on Expectations of Household Finances
We use a long panel with information on expected and realized changes in household finances to study the process of expectation formation and expectation errors, controlling for individual fixed...
View ArticleHousehold Finance
Household financial decisions are complex, interdependent, and heterogeneous, and central to the functioning of the financial system. We present an overview of the rapidly expanding literature on...
View ArticleHousehold Finance
Household financial decisions are complex, interdependent, and heterogeneous, and central to the functioning of the financial system. We present an overview of the rapidly expanding literature on...
View ArticleCrowded Ratings: Clientele Effects in the Corporate Bond Market
Consistent with a simple model of market segmentation, we document rating-based clientele effects in the corporate bond market. Supply shocks arising from idiosyncratic firm upgrades and downgrades...
View ArticlePortfolio Choice Over the Life Cycle: A Survey
Life-cycle portfolio choice models capture the role of human capital, housing, borrowing constraints, background risk, and several other crucial ingredients for determining the savings and investment...
View ArticleStock Market Participation and Portfolio Shares Over the Life-Cycle
We estimate the life-cycle profile of stock market participation and risky portfolio share. We avoid standard identification restrictions by estimating in first differences. This approach is also more...
View ArticleThe Cross-Section of Household Preferences
This paper estimates the cross-sectional distribution of Epstein-Zin preference parameters in a large administrative panel of Swedish households. We consider a life-cycle model of saving and portfolio...
View ArticleThe Cross-Section of Household Preferences
This paper estimates the cross-sectional distribution of Epstein-Zin preferences using the wealth and risky portfolio shares of a large panel of Swedish households. We find heterogeneous risk aversion...
View ArticleOn Optimal Allocations of Target-Date Funds
We study optimal life-cycle portfolio allocation and its application to target-date fund (TDF) design. We show that optimal TDF allocation must be explicitly linked to a savings rate; for example, a...
View ArticleBorrow Now, Pay Even Later: A Quantitative Analysis of Student Debt Payment...
In the United States, student debt currently represents the second largest component of consumer debt, just after mortgage loans. Repayment of those loans reduces disposable income early in their life...
View ArticleThe Cross-Section of Household Preferences
This paper estimates the cross-sectional distribution of Epstein-Zin preferences using the wealth and risky portfolio shares of a large panel of Swedish households. We find heterogeneous risk aversion...
View ArticleReaching for Yield: Evidence from Households
The existing literature has documented “reaching for yield”—the phenomenon of investing more in risky assets when interest rates are lower—among institutional investors. Using detailed transaction data...
View ArticleAsset Pricing and Risk Sharing Implications of Alternative Pension Plan Systems
We show that incorporating defined benefit pension funds in an incomplete markets asset pricing model improves its ability to match the historical equity premium and riskless rate and has important...
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