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

Laurent Bach, Laurent Calvet and Paolo Sodini
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Paolo Sodini: Department of Finance - SSE - Stockholm School of Economics

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Abstract: We investigate wealth returns on an administrative panel containing the disaggregated balance sheets of Swedish residents. The expected return on household net wealth increases with net worth, exceeding the risk-free rate by 9% for households in the top 0.01%. The expected wealth return is driven by systematic risk-taking and exhibits strong persistence. Idiosyncratic risk is transitory but sufficiently large among business owners to generate substantial long-term dispersion in returns in top brackets. We estimate the distribution of the geometric average return on gross wealth over a generation. Heterogeneity in returns explains most of the historical increase in top wealth shares.

Keywords: Household finance; inequality; risk-taking; factor-based investing; leverage; real estate; private equity; cost of debt. (search for similar items in EconPapers)
Date: 2015-12-21
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Related works:
Working Paper: Rich Pickings? Risk, Return, and Skill in the Portfolios of the Wealthy (2016)
Working Paper: Rich Pickings? Risk, Return, and Skill in the Portfolios of the Wealthy (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:wpaper:hal-02002692

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