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Rich Pickings? Risk, Return, and Skill in the Portfolios of the Wealthy

Author

Listed:
  • Calvet , Laurent E
  • Bach , Laurent
  • Sodini, Paolo

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.

Suggested Citation

  • Calvet , Laurent E & Bach , Laurent & Sodini, Paolo, 2015. "Rich Pickings? Risk, Return, and Skill in the Portfolios of the Wealthy," HEC Research Papers Series 1126, HEC Paris.
    • Handle: RePEc:ebg:heccah:1126
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    Keywords

    Household finance; inequality; risk-taking;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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