The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
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Portfolio Choice and Asset Prices: The Importance of Entrepreneurial Risk
Published: 6/2000, Volume: 55, Issue: 3 | DOI: 10.1111/0022-1082.00244 | Cited by: 693
John Heaton, Deborah Lucas
Using cross‐sectional data from the SCF and Tax Model, we show that entrepreneurial income risk has a significant influence on portfolio choice and asset prices. We find that households with high and variable business income hold less wealth in stocks than other similarly wealthy households, although they constitute a significant fraction of the stockholding population. Similarly for nonentrepreneurs, holding stock in the firm where one works reduces the portfolio share of other common stocks. Finally, we show that adding proprietary income to a linear asset pricing model improves its performance over a similar model that includes only wage income.
Government Security Dealers' Positions, Information and Interest‐Rate Expectations: A Note
Published: 12/1983, Volume: 38, Issue: 5 | DOI: 10.1111/j.1540-6261.1983.tb03847.x | Cited by: 1
JAMES C. VAN HORNE, HAL B. HEATON
Overconfidence, Compensation Contracts, and Capital Budgeting
Published: 9/21/2011, Volume: 66, Issue: 5 | DOI: 10.1111/j.1540-6261.2011.01686.x | Cited by: 428
SIMON GERVAIS, J. B. HEATON, TERRANCE ODEAN
A risk‐averse manager's overconfidence makes him less conservative. As a result, it is cheaper for firms to motivate him to pursue valuable risky projects. When compensation endogenously adjusts to reflect outside opportunities, moderate levels of overconfidence lead firms to offer the manager flatter compensation contracts that make him better off. Overconfident managers are also more attractive to firms than their rational counterparts because overconfidence commits them to exert effort to learn about projects. Still, too much overconfidence is detrimental to the manager since it leads him to accept highly convex compensation contracts that expose him to excessive risk.