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

Principal Investigator(s): View help for Principal Investigator(s) Laurent Bach, ESSEC Business School; Laurent Calvet, EDHEC Business School; Paolo Sodini, Stockholm School of Economics

Version: View help for Version V3

Name	File Type	Size	Last Modified
AER Code Package			03/10/2020 03:12:PM

Project Citation:

Bach, Laurent, Calvet, Laurent, and Sodini, Paolo. Rich Pickings? Risk, Return, and Skill in Household Wealth. Nashville, TN: American Economic Association [publisher], 2020. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2020-03-10. https://doi.org/10.3886/E117466V3

Project Description

Summary: 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.

Scope of Project

Subject Terms: Household finance; Inequality; Risk-taking; Factor-based investing; Leverage; Real estate; Private equity; Cost of debt

JEL Classification:
      D14 Household Saving; Personal Finance
      D31 Personal Income, Wealth, and Their Distributions
      G11 Portfolio Choice; Investment Decisions

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Published Versions

V5 [2020-05-06]

V4 [2020-05-06]

V3 [2020-03-10]

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Dublin Core

DDI 2.5

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