23 April 2007
The American Economic Association has announced that this year's John Bates Clark Medal has been awarded to Susan Athey, professor of economics here at Harvard. The Clark Medal is awarded every other year to an American economist under the age of 40 who has made a significant contribution to economic thought. Previous winners include Kenneth Arrow, Dale Jorgenson, James Heckman, Jerry Hausman, and (most recently) Daron Acemoglu. Professor Athey stands out in one respect, however; she is the first woman to be awarded the Clark Medal (and about time, too!). For more information, see the AEA announcment or coverage in the Harvard Crimson.
This week, the Applied Statistics Workshop will present a talk by John Campbell, the Morton L. and Carole S. Olshan Professor of Economics at Harvard University. Professor Cambell received his Ph.D. from Yale University and served on the faculty at Princeton before coming to Harvard in 1994. He is the author or editor of four books, and he has published widely in journals in economics and finance, including the American Economic Review, Econometrica, and the Quarterly Journal of Economics. He recently served as the president of the American Finance Association.
Professor Campbell will present a talk entitled "Fight or Flight: Portfolio Rebalancing By Individual Investors." The talk is based on joint work with Laurent E. Calvet and Paolo Sodini; their paper is available from the course website. The presentation will be at noon on Wednesday, April 25 in Room N354, CGIS North, 1737 Cambridge St. As always, lunch will be provided. An abstract of the talk follows on the jump:
Fight Or Flight? Portfolio Rebalancing By Individual Investors Laurent E. Calvet, John Y. Campbell and Paolo Sodini
This paper investigates the dynamics of individual portfolios in a unique dataset containing the disaggregated wealth and income of all households in Sweden. Between 1999 and 2002, stockmarket participation slightly increased but the average share of risky assets in the financial portfolio of participants fell moderately, implying little aggregate rebalancing in response to the decline in risky asset prices during this period. We show that these aggregate results conceal strong household level evidence of active rebalancing, which on average offsets about one half of idiosyncratic passive variations in the risky asset share. Sophisticated households with greater education, wealth, and income, and holding better diversified portfolios, tend to rebalance more aggressively. We also study the decisions to enter and exit risky financial markets. More sophisticated households are more likely to enter, and less likely to exit. Portfolio characteristics and performance also influence exit decisions. Households with poorly diversified portfolios and poor returns on their mutual funds are more likely to exit; however, consistent with the literature on the disposition effect, households with poor returns on their directly held stocks are less likely to exit.