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

Resource Type
  • Bach, Laurent (ESSEC Business School)
  • Calvet, Laurent (EDHEC Business School)
  • Sodini, Paolo (Stockholm School of Economics)
Publication Date
Free Keywords
Household finance; Inequality; Risk-taking; Factor-based investing; Leverage; Real estate; Private equity; Cost of debt
  • 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%. 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.

Temporal Coverage
  • 2000-01-01 / 2007-12-31
    Time Period: Sat Jan 01 00:00:00 EST 2000--Mon Dec 31 00:00:00 EST 2007
Geographic Coverage
  • Sweden
  • Is previous version of
    DOI: 10.3886/E117466V5
  • Bach, Laurent, Laurent E. Calvet, and Paolo Sodini. “Rich Pickings? Risk, Return, and Skill in Household Wealth.” American Economic Review, n.d.

Update Metadata: 2020-05-18 | Issue Number: 3 | Registration Date: 2020-05-06