Les Cahiers de Recherche - HEC Paris
Laurent E Calvet
Rich Pickings? Risk, Return, and Skill in the Portfolios of the Wealthy
(), Laurent Bach and Paolo Sodini
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.
Keywords: Household finance; inequality; risk-taking; (follow links to similar papers)
JEL-Codes: D12; D31; (follow links to similar papers)
57 pages, December 20, 2015
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