Diversification and its discontents: Idiosyncratic and entrepreneurial risk in the quest for social status

Journal of Finance

Volumn 65, Issue 5, 2010, Pages 1755-1788

  Roussanov, Nikolai ^a  

^a UNIVERSITY OF PENNSYLVANIA   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 77957153573     PISSN: 00221082     EISSN: 15406261     Source Type: Journal    
DOI: 10.1111/j.1540-6261.2010.01593.x     Document Type: Article

References (71)

1. Abel Andrew B. Asset prices under habit formation and catching up with the Joneses. American Economic Review 1990, 80:38-42.
2. Bakshi Gurdip S, Chen Zhiwu. The spirit of capitalism and stock market prices. American Economic Review 1996, 86:133-157.
3. Barberis Nicholas, Huang Ming. Stocks as lotteries: The implications of probability weighting for security prices. American Economic Review 2008, 98:2066-2100.
4. Barberis Nicholas, Huang Ming, Santos Jesus. Prospect theory and asset prices. Quarterly Journal of Economics 2001, 116:1-53.
5. Becker Gary S, Murphy Kevin M, Werning Ivan. The equilibrium distribution of income and the market for status. Journal of Political Economy 2005, 113:231-248.
6. Bernardo Antonio, Welch Ivo. On the evolution of overconfidence and entrepreneurs. Journal of Economics & Management Strategy 2001, 10:301-330.
7. Bitler Marianne P, Moskowitz Tobias J, Vissing-Jørgensen Annette. Testing agency theory with entrepreneur effort and wealth. Journal of Finance 2005, 60:539-576.
8. Brown Gordon, Gardner Jonathan, Oswald Andrew, Qian Jing. Does wage rank affect employees' wellbeing. 2005, IZA Discussion Paper 1505
9. Brunnermeier Markus K, Parker Jonathan A. Optimal expectations. American Economic Review 2005, 95:1092-1118.
10. Cagetti Marco, De Nardi Mariacristina. Entrepreneurship, frictions, and wealth. Journal of Political Economy 2006, 114:835-870.
11. Calvet Laurent E, Campbell John Y, Sodini Paolo. Down or out: Assessing the welfare costs of household investment mistakes. Journal of Political Economy 2007, 115:707-747.
12. Campbell John Y. Household finance. Journal of Finance 2006, 61:1553-1604.
13. Campbell John Y, Cochrane John H. By force of habit: A consumption based explanation of aggregate stock market behavior. Journal of Political Economy 1999, 107:205-251.
14. Campbell John Y, Lettau Martin, Malkiel Burton G, Xu Yexiao. Have individual stocks become more volatile? An empirical exploration of idiosyncratic risk. Journal of Finance 2001, 56:1-43.
15. Carroll Christopher D. Why do the rich save so much. Does Atlas Shrug? The Economic Consequences of Taxing the Rich 2000, Slemrod Joel. ed., Harvard University Press, Cambridge, MA
16. Carroll Christopher D. Portfolios of the rich. Household Portfolios: Theory and Evidence 2002, Guiso LuigiHaliassos MichaelJappelli Tullio. eds., MIT Press, Cambridge, MA
17. Charles Kerwin Kofi, Hurst Erik, Roussanov Nikolai. Conspicuous consumption and race. Quarterly Journal of Economics 2009, 124:425-467.
18. Clark Andrew E, Oswald Andrew J. Satisfaction and comparison income. Journal of Public Economics 1996, 61:359-381.
19. Cocco Joao F, Gomes Francisco J, Maenhout Pascal J. Consumption and portfolio choice over the life cycle. Review of Financial Studies 2005, 18:491-533.
20. Cochrane John H. A simple test of consumption insurance. Journal of Political Economy 1991, 99:957-976.
21. Cole Harold, Mailath George, Postlewaite Andrew. Social norms, savings behavior and growth. Journal of Political Economy 1992, 100:1092-1126.
22. Cole Harold, Mailath George, Postlewaite Andrew. Investment and concern for relative position. Review of Economic Design 2001, 6:241-261.
23. Corneo Giacomo, Jeanne Olivier. Pecuniary emulation, inequality and growth. European Economic Review 1999, 43:1665-1678.
24. DeMarzo Peter, Kaniel Ron, Kremer Ilan. Diversification as a public good: Community effects in portfolio choice. Journal of Finance 2004, 59:1677-1715.
25. De Nardi Mariacristina. Wealth inequality and intergenerational links. Review of Economic Studies 2004, 71:743-768.
26. Duesenberry James S. Income, Saving, and the Theory of Consumer Behavior 1949, Harvard University Press, Cambridge, MA
27. Dupor Bill, Liu Wen-Fang. Jealousy and equilibrium overconsumption. American Economic Review 2003, 93:423-428.
28. Dynan Karen E, Ravina Enrichetta. Increasing income inequality, external habits, and self-reported happiness. American Economic Review Papers and Proceedings 2007, 97:226-231.
29. Dynan Karen E, Skinner Jonathan, Zeldes Stephen P. Do the rich save more. Journal of Political Economy 2004, 112:397-444.
30. Friedman Milton. Choice, chance, and the personal distribution of income. Journal of Political Economy 1953, 61:277-290.
31. Friedman Milton, Savage L J. The utility analysis of choices involving risk. Journal of Political Economy 1948, 56:279-304.
32. Gali Jordi. Keeping up with the Joneses: Consumption externalities, portfolio choice, and asset prices. Journal of Money, Credit and Banking 1994, 26:1-8.
33. Gollier Christian. Misery loves company: Equilibrium portfolios with heterogeneous consumption externalities. International Economic Review 2004, 45:1169-1192.
34. Gomes Francisco, Michaelides Alexander. Optimal life-cycle asset allocation: Understanding the empirical evidence. Journal of Finance 2005, 60:869-904.
35. Haisley Emily, Mostafa Romel, Loewenstein George. Subjective relative income and lottery ticket purchases. Journal of Behavioral Decision Making 2008, 21:283-295.
36. Hall Robert E, Woodward Susan E. The incentives to start new companies: Evidence from venture capital. 2007, NBER Working paper 13056
37. Harvey Campbell R, Siddique Akhtar. Conditional skewness in asset pricing tests. Journal of Finance 2000, 55:1263-1295.
38. Heaton John C, Lucas Deborah J. Portfolio choice and asset prices: The importance of entrepreneurial risk. Journal of Finance 2000a, 55:1163-1198.
39. Heaton John C, Lucas Deborah J. Portfolio choice in the presence of background risk. The Economic Journal 2000b, 110:1-26.
40. Heaton John C, Lucas Deborah J. Capital structure, hurdle rates, and portfolio choice: Interactions in an entrepreneurial firm. 2004, Working paper, University of Chicago and Northwestern University
41. Huberman Gur. Familiarity breeds investment. Review of Financial Studies 2001, 14:659-680.
42. Hurst Erik, Lusardi Annamaria. Liquidity constraints, household wealth and entrepreneurship. Journal of Political Economy 2004, 112:319-347.
43. Hurst Erik, Stafford Frank, Luoh Ming-Ching. Wealth dynamics of American families: 1984-1994. Brookings Papers on Economic Activity 1998, 1998:267-337.
44. Ikeda Shinsuke. Luxury and wealth. International Economic Review 2006, 47:495-526.
45. Judd Kenneth. Numerical Methods in Economics 1999, MIT Press, Cambridge, MA
46. Kahl Matthias, Liu Jun, Longstaff Francis A. Paper millionaires: How valuable is stock to a stockholder who is restricted from selling it. Journal of Financial Economics 2003, 67:385-410.
47. Kraus Alan, Litzenberger Robert H. Skewness preference and the valuation of risk assets. Journal of Finance 1976, 31:1085-1100.
48. Krussell Per, Smith Anthony A. Income and wealth heterogeneiety in the macroeconomy. Journal of Political Economy 1998, 106:867-896.
49. Laibson David. Golden eggs and hyperbolic discounting. Quarterly Journal of Economics 1997, 112:443-477.
50. Lopes Lola L. Between hope and fear: The psychology of risk. Advances in Experimental Social Psychology 1987, Berkowitz Leonard. ed., Academic Press, San Diego
51. Luttmer Erzo, F P. Neighbors as negatives: Relative earnings and well-being. Quarterly Journal of Economics 2005, 120:963-1002.
52. Malloy Christopher, Moskowitz Tobias, Vissing-Jørgensen Annette. Long-run stockholder consumption risk and asset returns. Journal of Finance 2005, 64:2427-2479.
53. Massa Massimo, Simonov Andrei. Hedging, familiarity and portfolio choice. Review of Financial Studies 2006, 19:633-685.
54. McBride Michael. Relative-income effects on subjective well-being in the cross-section. Journal of Economic Behavior & Organization 2001, 45:251-278.
55. Merton Robert C. An intertemporal capital asset pricing model. Econometrica 1973, 41:867-887.
56. Miao Jianjun, Wang Neng. Experimentation under uninsurable idiosyncratic risk: An application to entrepreneurial survival. 2007, Working paper, Columbia University
57. Moskowitz Tobias J, Vissing-Jørgensen Annette. The returns to entrepreneurial investment: A private equity premium puzzle. American Economic Review 2002, 92:745-778.
58. Piazzesi Monika, Schneider Martin. Asset prices and asset quantities. Journal of the European Economic Association 2007, 5:380-389.
59. Polkovnichenko Valery. Human capital and the private equity premium. Review of Economic Dynamics 2003, 6:831-845.
60. Polkovnichenko Valery. Household portfolio diversification: A case for rank-dependent preferences. Review of Financial Studies 2005, 18:1467-1502.
61. Puri Manju, Robinson David T. Optimism and economic choice. Journal of Financial Economics 2007, 86:71-99.
62. Robson Arthur J. Status, the distribution of wealth, private and social attitudes to risk. Econometrica 1992, 60:837-857.
63. Roussanov Nikolai. Diversification and its discontents: Idiosyncratic and entrepreneurial risk in the quest for social status. 2008, Ph.D. Dissertation, University of Chicago
64. Shefrin Hersh, Statman Meir. Behavioral portfolio theory. Journal of Financial and Quantitative Analysis 2000, 35:127-151.
65. Smith Adam. The Theory of Moral Sentiments 1759, Reprinted 1969, Arlington House, New Rochelle, NY
66. Storesletten Kjetil, Telmer Chris, Yaron Amir. Asset pricing with idiosyncratic risk and overlapping generations. Review of Economic Dynamics 2007, 10:519-548.
67. Uppal Raman, Wang Tan. Model misspecification and under-diversification. Journal of Finance 2003, 58:2465-2486.
68. Van Nieuwerburgh Stijn, Veldkamp Laura. Information acquisition and portfolio under-diversification. Review of Economic Studies 2010, 77:779-805.
69. Venti Steven, Wise David. The cause of wealth dispersion at retirement: Choice or chance. American Economic Review 1998, 88:185-191.
70. Viceira Luis M. Optimal portfolio choice for long-horizon investors with nontradable labor income. Journal of Finance 2001, 56:433-470.
71. Wachter Jessica, Yogo Motohiro. Why do household portfolio shares rise in wealth. 2007, Working paper, Wharton School-University of Pennsylvania