Heterogeneity and Persistence in Returns to Wealth.

Heterogeneity and Persistence in Returns to Wealth.

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Bibliographic Details
Author / Creator:Fagereng, Andreas.
Imprint:Washington, D.C. : International Monetary Fund, 2018.
Description:1 online resource (69 pages)
Language:English
Series:IMF Working Papers
IMF Working Papers; Working Paper ; no. 18/171.
Subject:
Wealth -- Econometric models.
Income distribution -- Econometric models.
Saving and investment -- Econometric models.
Income distribution -- Econometric models.
Saving and investment -- Econometric models.
Wealth -- Econometric models.
Format: E-Resource Book
URL for this record:http://pi.lib.uchicago.edu/1001/cat/bib/12508260
Hidden Bibliographic Details
Other authors / contributors:Guiso, Luigi.
Malacrino, Davide.
ISBN:9781484371626
1484371623
1484370066
9781484370063
9781484370063
Notes:Print version record.
Summary:We provide a systematic analysis of the properties of individual returns to wealth using twelve years of population data from Norway's administrative tax records. We document a number of novel results. First, during our sample period individuals earn markedly different average returns on their financial assets (a standard deviation of 14%) and on their net worth (a standard deviation of 8%). Second, heterogeneity in returns does not arise merely from differences in the allocation of wealth between safe and risky assets: returns are heterogeneous even within asset classes. Third, returns are positively correlated with wealth: moving from the 10th to the 90th percentile of the financial wealth distribution increases the return by 3 percentage points - and by 17 percentage points when the same exercise is performed for the return to net worth. Fourth, wealth returns exhibit substantial persistence over time. We argue that while this persistence partly reflects stable differences in risk exposure and assets scale, it also reflects persistent heterogeneity in sophistication and financial information, as well as entrepreneurial talent. Finally, wealth returns are (mildly) correlated across generations. We discuss the implications of these findings for several strands of the wealth inequality debate.
Other form:Print version: Fagereng, Andreas. Heterogeneity and Persistence in Returns to Wealth. Washington, D.C. : International Monetary Fund, ©2018 9781484370063
Standard no.:10.5089/9781484370063.001
Table of Contents:
  • Cover; TABLE OF CONTENTS; I. INTRODUCTION; II. DATA SOURCES AND VARIABLE DEFINITION; A. Administrative wealth and capital income records; B. Wealth aggregates and returns to wealth; C. Measuring returns to wealth; D. Some conceptual remarks; E. Descriptive statistics; III. STILIZED FACTS ABOUT RETURNS TO WEALTH; A. Returns to wealth are heterogeneous; B. Returns covary with the level of wealth; C. Robustness; IV. MODELING AND ESTIMATING RETURNS TO WEALTH; A.A statistical model of returns to wealth; B. Estimation results; C. Persistent heterogeneity; V. INTERPRETING PERSISTENT HETEROGENEITY.
  • A. Additional evidenceVI. INTERGENERETIONAL PERSISTENCE IN RETURNS TO WEALTH; VII. DISCUSSION AND CONCLUSION; FIGURES; Figure 1. Heterogeneity in returns to wealth by share of risky assets; Figure 2. The correlation between financial wealth and its return; Figure 3. The Sharpe ratio and initial wealth; Figure 4. The correlation between net worth and its return; Figure 5. Explaining the relation between net worth and its return; Figure 6. The distribution of fixed effects in the return to wealth; Figure 7. The distribution of fixed effects in the return to wealth, selected characteristics.
  • Figure 8. Deposit accounts bank and individual fixed effectsFigure 9. The intergenerational correlation in wealth and returns; TABLES; Table 1. Portfolio composition, by selected fractiles; Table 2. Descriptive statistics; Table 3. Value-weighted returns; Table 4. Explaining returns to wealth: Financial wealth; Table 5. Explaining returns to wealth: Net worth; Table 6. Fixed effects statistics; Table 7. Explaining the Sharpe ratio; Table 8. Intergenerational return percentile regressions.

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