This paper assesses the importance of heterogeneity in household portfolios for transmission monetary policy a New Keynesian business cycle model with uninsurable income risk and assets different liquidity. In this environment, works through investment, but redistribution lowers elasticity investment via two channels: (i) marginal propensities to invest, (ii) time variation liquidity premium. M...

The present paper extends the Arrow-Debreu portfolio model to consumption externalities. It is assumed that each investor has a von NeumannMorgenstern utility that is a function of her own consumption and of the average consumption in the group to which she belongs. Individual degrees of risk aversion and conformism are heterogeneous within each group and between the different groups in the eco...

This paper explores analytically the implications of higher order moments in the distribution of returns for the myopic optimal portfolio of an expected utility maximizer. The use of cumulant generating functions and entropy is crucial to find these solutions. With constant absolute risk aversion (CARA) utility, I find in closed form the optimal amount of risky asset for many distributions. My ...

Using information from option prices I construct two new measures of dependence between assets and industries, the Jump Tail Implied Correlation and the Tail Correlation Risk Premia. The main contribution of the paper is the construction of a systemic risk factor from daily …nancial measures using a quantile-regression-based methodology. In this direction, the paper …lls the existing gap betwee...

Abstract The return expectations of public pension funds are positively related to cross-sectional differences in past performance. This positive relation operates through the expected risk premium, rather than risk-free rate or inflation rate. Pension act on their beliefs and adjust portfolio composition accordingly. Persistent investment skills, taking, efforts reduce costly rebalancing, fisc...

Abstract. In this paper, we formulate a general time-inconsistent stochastic linear–quadratic (LQ) control problem. The time-inconsistency arises from the presence of a quadratic term of the expected state as well as a state-dependent term in the objective functional. We define an equilibrium, instead of optimal, solution within the class of open-loop controls, and derive a sufficient condition...

Over the past 75 years, common stocks performed better under Democrats, while U.S. government bonds and Treasury (T) bills performed better under Republicans. Using a mean-variance framework, we find that Democrats provide better risk-reward opportunities for portfolios weighted toward stocks, while Republicans provide better tradeoffs for portfolios weighted toward government bonds and T-bills...

the present paper aimed at studying the current models of credit portfolio management. there are currently three types of models which consider the risk of credit portfolio: the structural models (moody's kmv model, and credit- metrics model), the intensity models (the actuarial models) and the econometric models (the macro-factors model). the development of these three types of models is based...