| 1. |
- Bach, Laurent, et al.
(författare)
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Data and Code for: Rich Pickings? Risk, Return, and Skill in Household Wealth
- 2020
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Annan publikation (övrigt vetenskapligt/konstnärligt)abstract
- We investigate wealth returns on an administrative panel containing the disaggregated balance sheets of Swedish residents. The expected return on household net wealth is strongly persistent, determined primarily by systematic risk, and increasing in net worth, exceeding the risk-free rate by the size of the equity premium for households in the top 0.01%. Idiosyncratic risk is transitory but generates substantial long-term dispersion in returns in top brackets. Systematic and idiosyncratic risk both drive the cross-sectional distribution of the geometric average return over a generation. Furthermore, wealth returns explain most of the historical increase in top wealth shares.
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| 2. |
- Bach, Laurent, et al.
(författare)
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Rich Pickings? Risk, Return, and Skill in Household Wealth
- 2018
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Annan publikation (övrigt vetenskapligt/konstnärligt)abstract
- We investigate wealth returns on an administrative panel containing the disaggregated balance sheets of Swedish residents. The expected return on household net wealth increases with net worth, exceeding the risk-free rate by 9% for households in the top 0.01%. The expected wealth return is driven by systematic risk-taking and exhibits strong persistence. Idiosyncratic risk is transitory but sufficiently large among business owners to generate substantial long-term dispersion in returns in top brackets. We estimate the distribution of the geometric average return on gross wealth over a generation. Heterogeneity in returns explains most of the historical increase in top wealth shares.
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| 3. |
- Bach, Laurent, et al.
(författare)
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Rich Pickings? Risk, Return, and Skill in Household Wealth
- 2020
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Ingår i: American Economic Review. - : American Economic Association. - 0002-8282. ; 110:9, s. 2703-2747
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Tidskriftsartikel (refereegranskat)abstract
- We investigate wealth returns on an administrative panel containing the disaggregated balance sheets of Swedish residents. The expected return on household net wealth is strongly persistent, determined primarily by systematic risk, and increasing in net worth, exceeding the risk-free rate by the size of the equity premium for households in the top 0.01 percent. Idiosyncratic risk is transitory but generates substantial long-term dispersion in returns in top brackets. Systematic and idiosyncratic risk both drive the cross-sectional distribution of the geometric average return over a generation. Furthermore, wealth returns explain most of the historical increase in top wealth shares.
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| 4. |
- Bach, Laurent, et al.
(författare)
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Rich Pickings? Risk, Return, and Skill in the Portfolios of the Wealthy
- 2015
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Annan publikation (övrigt vetenskapligt/konstnärligt)abstract
- This paper empirically investigates the portfolios of wealthy households and their implications for the dynamics of inequality. Using an administrative panel of all Swedish residents, we document that returns on financial wealth are on average 4% higher per year for households in the top 1% compared to the median household. These high average returns are primarily compensations for high levels of systematic risk. Abnormal risk-adjusted returns, linked for instance to informational advantages or exceptional investment skill, contribute only marginally to the high returns of the wealthy. Implications for inequality dynamics and public policy are discussed.
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| 5. |
- Bach, Laurent, et al.
(författare)
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Soft Negotiators or Modest Builders? : Why Women Earn Lower Real Estate Returns
- 2022
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Ingår i: SSRN Electronic Journal. - Stockholm : Swedish House of Finance (SHOF). - 1556-5068.
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Annan publikation (övrigt vetenskapligt/konstnärligt)abstract
- Using repeat-sales data on apartments in Sweden, we estimate the gender gap in housing returns. We confirm that single women’s returns gross of renovations are lower than single men’s by more than 2pp, that half of this gap is due to market timing, and that it is concentrated in short holding period. Adding administrative data on renovation expenses and traders’ background, we find that women are much less likely to undertake renovations and to specialize in real estate professional activities. Once these differences are accounted for, we do not find any gender gap in real estate returns
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| 6. |
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| 7. |
- Calvet, LE, et al.
(författare)
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Supplementary Appendix for " The Cross-Section of Household Preferences "
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Annan publikation (övrigt vetenskapligt/konstnärligt)abstract
- This Supplementary Appendix explains the rules of the Swedish pension system applying to households in the 1999 to 2007 sample. Section 1 defines key indexes used in the calculation of pensions. Section 2 discusses the organization of public pensions, and Section 3 the organization of occupational pensions. Section 4 explains the allocation rule of the default fund in the public DC pension system. Section 5 describes the imputation of private pension contributions and wealth. Section 6 analyzes the impact of taxation.
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| 8. |
- Calvet, LE, et al.
(författare)
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Twin picks : Disentangling the determinants of risk-taking in household portfolios
- 2014
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Ingår i: Journal of Finance. - : Wiley: No OnlineOpen. - 1540-6261 .- 0022-1082. ; 69:2, s. 867-906
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Tidskriftsartikel (refereegranskat)abstract
- This paper investigates risk-taking in the liquid portfolios held by a large panel of Swedish twins. We document that the portfolio share invested in risky assets is an increasing and concave function of financial wealth, leading to different risk sensitivities across investors. Human capital, which we estimate directly from individual labor income, also affects risk-taking positively, while internal habit and expenditure commitments tend to reduce it. Our microfindings lend strong support to decreasing relative risk aversion and habit formation preferences. Furthermore, heterogeneous risk sensitivities across investors help reconcile individual preferences with representative-agent models. © 2014 the American Finance Association.
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| 9. |
- Calvet, LE, et al.
(författare)
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Who Are the Value and Growth Investors?
- 2017
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Ingår i: Journal of Finance. - : Wiley: No OnlineOpen. - 1540-6261 .- 0022-1082. ; 72:1, s. 5-46
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Tidskriftsartikel (refereegranskat)abstract
- This paper investigates value and growth investing in a large administrative panel of Swedish residents. We show that, over the life cycle, households progressively shift from growth to value as they become older and their balance sheets improve. Furthermore, investors with high human capital and high exposure to macroeconomic risk tilt their portfolios away from value. While several behavioral biases seem evident in the data, the patterns we uncover are overall remarkably consistent with the portfolio implications of risk-based theories of the value premium.
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| 10. |
- Celerier, Claire, et al.
(författare)
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Can Security Design Foster Household Risk-Taking?
- 2023
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Ingår i: Journal of Finance. - : Wiley. - 1540-6261 .- 0022-1082. ; 78:4, s. 1917-1966
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Tidskriftsartikel (refereegranskat)abstract
- This paper shows that securities with nonlinear payoff designs can foster household risk-taking. We demonstrate this effect by exploiting the introduction of capital guarantee products in Sweden between 2002 and 2007. Their fast and broad adoption is associated with an increase in expected financial portfolio returns. The effect is especially strong for households with low-risk appetite ex ante. These empirical facts are consistent with a life-cycle model in which households have pessimistic beliefs or preferences combining loss aversion and narrow framing. Our results illustrate how security design can mitigate behavioral biases to increase mean household portfolio returns.
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| 11. |
- Foltyn, Richard, 1981-
(författare)
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Essays in Macroeconomics and Household Finance
- 2020
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Doktorsavhandling (övrigt vetenskapligt/konstnärligt)abstract
- Experience-based Learning, Stock Market Participation and Portfolio ChoiceRecent evidence suggests that lifetime experiences play an important role in determining households' investment choices. I incorporate these findings and the fact that household portfolios are underdiversified into an otherwise standard life-cycle model and examine to what extent they can help resolve long-standing puzzles in the literature regarding stock market participation and the fraction of financial wealth invested in risky assets. I show that experience-based learning about returns creates a positive correlation between a household's position in the wealth distribution and its optimism about future returns. The wealthy consequently increase their investment in risky assets, while participation is limited among poor households. I find that in a reasonably calibrated quantitative model, this mechanism is able to close approximately half of the gap between the participation rates observed in the data and the predictions from standard models.Health Dynamics and Heterogeneous Life ExpectanciesIn this paper, we provide improved estimates for age-dependent health transitions and survival probabilities for different subsamples of the US population. The estimated yearly transition matrices can be used in any life-cycle model where health and survival dynamics are of interest. The results show substantial heterogeneity in life expectancy in the population. For a 70-year-old man in excellent health, the probability of reaching his 80th birthday is around 75%, while the corresponding probability for a man in poor health is just below 40%.Subjective Life Expectancies, Time Preference Heterogeneity and Wealth InequalityTime preference heterogeneity is one of the potential sources of wealth inequality, but preferences are difficult to measure and quantify. In this paper, we investigate one source of time preference heterogeneity: heterogeneity in life expectancy. We document a systematic bias in subjective survival beliefs within cohorts that exacerbates the heterogeneity found in the population: individuals with a low survival probability relative to their peers underestimate their life expectancies, while individuals with a high survival probability overestimate theirs. We introduce survival heterogeneity into an otherwise standard overlapping-generations model and let survival probabilities and beliefs evolve stochastically according to a health and death process estimated from micro data. We find strong effects of life expectancy heterogeneity on within-cohort wealth inequality, but small effects on economy-wide wealth inequality.On the Redistributive Effects of Government Bailouts in the Mortgage MarketIn this paper we study the aggregate and distributional consequences of government bailout guarantees in the US mortgage market. We construct a model with aggregate risk in which competitive financial intermediaries issue mortgages to households that can default on their debt. Default probabilities are priced into mortgage interest rates unless a government bailout guarantee makes the lenders whole even in economic downturns in which foreclosure rates surge. We use the model to assess the extent to which bailout guarantees lead to excessive mortgage lending, household leverage and foreclosures in episodes of housing crises, as well as excess volatility in house prices in severe recessions.
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| 12. |
- Girshina, Anastasia, et al.
(författare)
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Soft Negotiators or Modest Builders? Why Women Earn Lower Real Estate Returns
- 2024
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Ingår i: SSRN Electronic Journal. - : Elsevier BV. - 1556-5068.
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Annan publikation (övrigt vetenskapligt/konstnärligt)abstract
- Using repeat-sales data on apartments in Sweden, we estimate the gender gap in housing returns. We confirm that single women's returns gross of renovations are lower than single men's by more than 2pp, that half of this gap is due to market timing, and that it is concentrated in short holding period. Adding administrative data on renovation expenses and traders' background, we find that women are much less likely to undertake renovations and to specialize in real estate professional activities. Once these differences are accounted for, we do not find any gender gap in real estate returns.
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| 13. |
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| 14. |
- Guiso, Luigi, et al.
(författare)
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Household Finance : An Emerging Field
- 2013
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Ingår i: Handbook of the Economics of Finance. - Amsterdam : Elsevier. - 9780444594068 ; , s. 1397-1532
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Bokkapitel (övrigt vetenskapligt/konstnärligt)abstract
- Household finance-the normative and positive study of how households use financial markets to achieve their objectives-has gained a lot of attention over the past decade and has become a field with its own identity, style, and agenda. In this chapter we review its evolution and most recent developments.
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| 15. |
- Nieuwerburgh Van, Stijn, et al.
(författare)
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Identifying the Benefits from Home Ownership: A Swedish Experiment
- 2016
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Annan publikation (övrigt vetenskapligt/konstnärligt)abstract
- This paper studies the economic benefits of home ownership. Exploiting a quasi-experiment surrounding privatization decisions of municipally-owned apartment buildings, we obtain random variation in home ownership for otherwise similar buildings with similar tenants. We link the tenants to their tax records to obtain information on demographics, income, mobility patterns, housing wealth, financial wealth, and debt. These data allow us to construct high-quality measures of consumption expenditures. Home ownership causes households to move up the housing ladder, work harder, and save more. Consumption increases out of housing wealth are concentrated among the home owners who sell subsequent to privatization and among those who receive negative income shocks, evidencing a collateral effect.
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| 16. |
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| 17. |
- Sodini, Paolo, et al.
(författare)
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Can Security Design Foster Household Risk-Taking?
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Annan publikation (övrigt vetenskapligt/konstnärligt)abstract
- This paper shows that securities with a non-linear payoff design can foster household risk-taking. We demonstrate this effect empirically by exploiting the introduction of capital guarantee products in Sweden from 2002 to 2007. The fast and broad adoption of these products is associated with an increase in expected financial portfolio returns, which is especially strong for households with a low risk appetite ex ante. We explore possible economic explanations by developing a life-cycle model of consumption-portfolio decisions. The capital guarantee substantially increases risk-taking by households with pessimistic beliefs or preferences combining loss aversion and narrow framing. The welfare gains from financial innovation are stronger for households that are less willing to take risk ex ante. Our results illustrate how security design can mitigate behavioral biases and enhance economic well-being.
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| 18. |
- Sodini, Paolo, et al.
(författare)
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Can Security Design Solve Household Reluctance to Take Risk?
- 2019
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Ingår i: SSRN Electronic Journal. - : Elsevier BV. - 1556-5068.
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Annan publikation (övrigt vetenskapligt/konstnärligt)abstract
- Using a comprehensive administrative panel of Swedish households, we show how the introduction of capital protected investments and their broad adoption lead to a significant increase in exposure to stock markets for a large share of the population. This effect is significantly more pronounced for households exhibiting a high reluctance to take financial risk before innovation. To rationalize our empirical findings, we develop a lifecycle model and confront a set of utility functions to the data. We find that first order risk aversion with narrow framing (Barberis and Huang 2009) can explain both the increase in the risky share and the heterogeneity we empirically observe. Our results illustrate how security design can mitigate household reluctance to take financial risk.
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| 19. |
- Sodini, Paolo
(författare)
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Consumers and Financial Market
- 2012
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Ingår i: Efter finanskrisen – några perspektiv på finansmarknaden. - : Finansmarknadskommittén.
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Bokkapitel (övrigt vetenskapligt/konstnärligt)
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| 20. |
- Sodini, Paolo, et al.
(författare)
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Countercyclical Income Risk and Portfolio Choices : Evidence from Sweden
- 2024
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Ingår i: Journal of Finance. - : John Wiley and Sons Inc. - 1540-6261 .- 0022-1082. ; 79:3, s. 1755-1788
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Tidskriftsartikel (refereegranskat)abstract
- Using Swedish administrative panel data, we document that workers facing higher left-tail income risk when equity markets perform poorly have lower portfolio equity share. In line with theory, the relationship between cyclical skewness and stock holdings increases with the share of human capital in a worker's total wealth and vanishes as workers get closer to retirement. Cyclical skewness also predicts portfolio differences within pairs of identical twins. Our findings show that households hedge against correlated tail risks, an important mechanism in asset pricing and portfolio choice models. © 2024 the American Finance Association.
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| 21. |
- Sodini, Paolo, et al.
(författare)
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Fight or flight? Portfolio rebalancing by individual investors
- 2009
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Ingår i: Quarterly Journal of Economics. - : Oxford University Press. - 1531-4650 .- 0033-5533. ; 124:1, s. 301-348
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Tidskriftsartikel (refereegranskat)abstract
- This paper investigates the dynamics of individual portfolios in a unique data set containing the disaggregated wealth of all households in Sweden. Between 1999 and 2002, we observe little aggregate rebalancing in the financial portfolio of participants. These patterns conceal strong household-level evidence of active rebalancing, which on average offsets about one-half of idiosyncratic passive variations in the risky asset share. Wealthy, educated investors with better diversified portfolios tend to rebalance more actively. We find some evidence that households rebalance toward a greater risky share as they become richer. We also study the decisions to trade individual assets. Households are more likely to fully sell directly held stocks if those stocks have performed well, and more likely to exit direct stockholding if their stock portfolios have performed well; but these relationships are much weaker for mutual funds, a pattern that is consistent with previous research on the disposition effect among direct stockholders and performance sensitivity among mutual fund investors. When households continue to hold individual assets, however, they rebalance both stocks and mutual funds to offset about one-sixth of the passive variations in individual asset shares. Households rebalance primarily by adjusting purchases of risky assets if their risky portfolios have performed poorly, and by adjusting both fund purchases and full sales of stocks if their risky portfolios have performed well. Finally, the tendency for households to fully sell winning stocks is weaker for wealthy investors with diversified portfolios of individual stocks.
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| 22. |
- Sodini, Paolo, et al.
(författare)
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Identifying the Benefits from Home Ownership: A Swedish Experiment
- 2016
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Annan publikation (övrigt vetenskapligt/konstnärligt)abstract
- Home ownership is widely stimulated by policy yet its effects are poorly understood. Exploiting privatization decisions of municipally-owned apartment buildings, we obtain random variation in home ownership for otherwise similar buildings with similar tenants. Granular data on demographics, income, housing and financial wealth, and debt allow us to construct high-quality measures of consumption expenditures. Home ownership leads households to increase spending and to smooth consumption in the wake of an adverse income shock. We also find a positive but short-lived effect on labor supply.
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| 23. |
- Sodini, Paolo, et al.
(författare)
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Identifying the Benefits from Homeownership : A Swedish Experiment
- 2016
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Annan publikation (övrigt vetenskapligt/konstnärligt)abstract
- Homeownership is widely stimulated by policy yet its economic effects are poorly understood. We exploit quasi-random variation in homeownership generated by privatization decisions of municipally-owned buildings, and use granular data on demographics, income, housing, financial wealth, and debt that allow us to construct high-quality measures of spending. Homeownership causes wealth building via house price appreciation, increases consumption, and improves consumption smoothing across time and states of the world through a collateral effect. It increases mobility for young households, who move up the property ladder, and amplifies wealth accumulation for older households, who take more risk in their financial portfolio.
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| 24. |
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| 25. |
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| 26. |
- Vestman, Roine, et al.
(författare)
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Data and Code for : Identifying the Benefits from Homeownership: A Swedish Experiment
- 2023
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Annan publikation (övrigt vetenskapligt/konstnärligt)abstract
- Homeownership is widely stimulated by policy yet its economic effects are poorly understood. We exploit quasi-random variation in homeownership generated by privatization decisions of municipally-owned buildings, and use granular data on demographics, income, housing, financial wealth, and debt that allow us to construct high quality measures of spending. Homeownership causes wealth accumulation via house price appreciation, increases consumption, and improves consumption smoothing across time and states of the world. It increases mobility for young households, who move up the property ladder, and amplifies wealth accumulation for older households, who take more risk in their financial portfolio.
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| 27. |
- von Lilienfeld-Toal, Ulf, et al.
(författare)
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Identifying the Benefits from Homeownership : A Swedish Experiment
- 2023
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Ingår i: American Economic Review. - 1944-7981 .- 0002-8282. ; 113:12, s. 3173-3212
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Recension (övrigt vetenskapligt/konstnärligt)abstract
- Homeownership is widely stimulated by policy, yet its economic effects are poorly understood. We exploit quasi-random variation in homeownership generated by privatization decisions of municipally owned buildings and use granular data on demographics, income, housing, financial wealth, and debt that allow us to construct high-quality measures of spending. Homeownership causes wealth accumulation via house price appreciation, increases consumption, and improves consumption smoothing across time and states of the world. It increases mobility for young households, who move up the property ladder, and amplifies wealth accumulation for older households, who take more risk in their financial portfolio.
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| 28. |
- Zetterdahl, Emma, 1986-
(författare)
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Take a risk : social interaction, gender identity, and the role of family ties in financial decision-making
- 2015
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Doktorsavhandling (övrigt vetenskapligt/konstnärligt)abstract
- This thesis consists of an introductory part and four self-contained papers related to individual financial behavior and risk-taking in financial markets.In Paper [I] we estimate within-family and community social interaction effects upon an individual’s stock market entry, participation, and exit decision. Interestingly, community sentiment towards the stock market (based on portfolio outcomes in the community) does not influence individuals’ likelihood to enter, while a positive sentiment increases (decreases) the likelihood of participation (exit). Overall, the results stress the importance of accounting for family social influence and highlight potentially important differences between family and community effects in individuals’ stock market participation.In Paper [II] novel evidence is provided indicating that the influence from family (parents and partners) and peer social interaction on individuals’ stock market participation vary over different types of individuals. Results imply that individuals’ exposure to, and valuation of, stock market related social signals are of importance and thus, contribute to the understanding of the heterogeneous influence of social interaction. Overall, the results are interesting and enhance the understanding of the underlying mechanisms of social interaction on individuals’ financial decision making.In Paper [III] the impact of divorce on individual financial behavior is empirically examined in a dynamic setting. Evidence that divorcing individuals increase their saving rates before the divorce is presented. This may be seen as a response to the increase in background risk that divorce produces. After the divorce, a negative divorce effect on individual saving rates and risky asset shares are established, which may lead to disparities in wealth accumulation possibilities between married and divorced. Women are, on average, shown to not adjust their precautionary savings to the same extent as men before the divorce. I also provide tentative evidence that women reduce their financial risk-taking more than men after a divorce, which could be a result of inequalities in financial positions or an adjustment towards individual preferences. Paper [IV] provides novel empirical evidence that gender identity is of importance for individuals’ financial risk-taking. Specifically, by use of matching and by dividing male and females into those with “traditional” versus “nontraditional” gender identities, comparison of average risk-taking between groupings indicate that over a third (about 35-40%) of the identified total gender risk differential is explained by differences in gender identities. Results further indicate that risky financial market participation is 19 percentage points higher in groups of women with nontraditional, compared with traditional, gender identities. The results, obtained while conditioning upon a vast number of controls, are robust towards a large number of alternative explanations and indicate that some individuals (mainly women) partly are fostered by society, through identity formation and socially constructed norms, to a relatively lower financial risk-taking.
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