Work

Rich Pickings? Risk, Return, and Skill in Household Wealth

Year: 2020

Type: article

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. (JEL D31, G11, G51)

Source: American Economic Review

DOI: 10.1257/aer.20170666

Authors: Laurent Bach, Laurent E. Calvet, Paolo Sodini

Institutions: École Supérieure des Sciences Économiques et Commerciales, ESSEC Business School, Center for Economic and Policy Research, Ecole des Hautes Etudes Commerciales du Nord, Stockholm School of Economics

Language: English

Topic: Financial Literacy, Pension, Retirement Analysis

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W3083873527

FWCI: 47.11

Cites: 88

Cited by: 357

Related to: 10