This paper considers the problem of continuous investment of capital in risky assets over time. Using a Bayesian framework, a model for asset prices is developed where the current price dynamics depend on the history of realized prices. A dynamic Bayesian fractional Kelly strategy, where the investor rebalances the portfolio based on the performance to date, is shown to be optimal assuming that...

We use detailed income, balance sheet, and cash flow statements constructed for households in a long monthly panel in an emerging market economy, and some recent contributions in economic theory, to document and better understand the factors underlying success in achieving upward mobility in the distribution of net worth. Wealth inequality is decreasing over time, and many households work their...

We endogenize the discount rate via a broad measure of wealth and provide empirical evidence that wealth affects the discount rate negatively. We demonstrate that the Pontryagin conditions require positive felicity for intuitive results, whereas the concavity of the Hamiltonian requires negative felicity for optimality. This dilemma also holds for the endogenizations of Obstfeld (1990) and foll...

Why do similar households end up with very different levels of wealth? We show that differences in the attitudes and skills with which they approach financial planning are a significant factor. We use new and unique survey data to assess these differences and to measure each household’s “propensity to plan.” We show that those with a higher such propensity spend more time developing financial p...

This paper explores how changes in marital status affected men's wealth accumulation in mid-nineteenth-century America, using a longitudinal sample of Union Army veterans linked to the 1860 and 1870 census manuscript schedules. Controlling for the endogeneity of wealth and marital selection, this paper provides strong evidence that marriage had positive effects on men's wealth accumulation, whe...