Claus Munk

Portfolio theory prescribes that investors combine a riskfree asset with a portfolio of all risky assets. Stock market index ETFs appear to be an excellent instrument to implement such a strategy. However, we identify and quantify four problems with the way stock market index ETF are constructed. But we also suggest improvements to the design of such ETFs. (With Tom Ernst and Holger Kraft)

We evaluate various retirement saving plans for a range of characteristics of the individual saver. Almost all individuals prefer a target-date fund investment strategy and benefit substantially from annuitization. Furthermore, most individuals prefer expected payouts to increase through retirement instead of the flat payouts of typical annuity plans.

Large declines in aggregate consumption often occur as a sequence of smaller drops over several years. When a drop is observed in one period, the risk of another drop in the next period goes up. By adding a tractable version of such self-exciting consumption disasters to a mainstream asset pricing model, we can better match the observed equity premium and other asset pricing moments. We also introduce the possibility of controlling the magnitude or the probability of disasters through costly interventions. (With Carina Fleischer, Holger Kraft, and Farina Weiss)