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)