The presence of illiquid assets, such as human wealth, housing and proprietorships substantially complicates the problem of portfolio choice. This paper is concerned with the problem of optimal asset allocation in a continuous time model when one asset cannot be traded. This illiquid asset, which depends on an uninsurable source of risk, provides a liquid dividend. In the case of human capital ...

We present a new approach for positioning, pricing, and hedging in incomplete markets that bridges standard arbitrage pricing and expected utility maximization. Our approach for determining whether an investor should undertake a particular position involves specifying a set of probability measures and associated °oors which expected payo®s must exceed in order for the investor to consider the h...

M any analysts view personal saving behavior, summarized by statistics such as the personal saving rate or household debt acquisition, as a key determinant of real economic activity. Some blame the recent sluggishness of output and employment growth on low personal saving in recent years. The low rate of personal saving leaves consumers unprepared for their customary role of pulling the economy...

This study examines whether participation in Individual Development Accounts (IDAs) leads to a significant growth in assets beyond saving in the IDA accounts. Using a longitudinal experimental research design for low-income IDA participants, we test for impacts on five measures of assets: liquid assets, other financial assets, total financial assets, real assets, and total assets. Results show ...

Restrictions placed on bank portfolios are analyzed in a banking model designed to capture the role of checking accounts in facilitating transactions. Forcing banks to hold only liquid assets creates the incentive for liquidity-based runs. Even when a run does not occur, welfare is reduced as a result of overinvestment in the liquid asset. & 2010 Elsevier B.V. All rights reserved.

This paper develops a sequential random matching model of asset trading to analyze how the extent of information about an asset that is available in the market can affect its tradeability. Liquidity traders are rational agents with higher impatience, which make optimal intertemporal consumption decisions given the trading constraints. Information asymmetries result in unexecuted trades. Agents ...

We examine the effect of asset redeployability on corporate misconduct and find a significant positive relationship. Utilizing large sample public US firms for period 2001 to 2015, we that one standard deviation (SD) increase in proportion redeployable assets leads 7.2% fines. also association between varies across types industrial heterogeneity. In our channel analysis, managerial risk-taking ...