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Turnover activity in wealth portfolios

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  • Castaldi, Carolina
  • Milakovic, Mishael

Abstract

We examine several named subsets of the wealthiest individuals in the US and the UK that are compiled by Forbes Magazine and Sunday Times. The data support conventional wisdom of a wealth distribution with power law-distributed right tail, and they allow us to calibrate a statistical equilibrium model of wealth distribution. Such a model is not only able to account for the observed power law tail of wealth distribution, but is also consistent with the asymmetric laplacian distribution of portfolio returns that we observe in both our samples. In addition, with information on the distribution of portfolio returns that we construct from the subsets, the model provides an indicator for how often changes in the composition of the wealthiest portfolios occur – an indicator we call turnover activity. Finally, we also calculate a simple mobility measure from the subsets and look at trends in equality, mobility and turnover activity.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 63 (2007)
Issue (Month): 3 (July)
Pages: 537-552

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Handle: RePEc:eee:jeborg:v:63:y:2007:i:3:p:537-552

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References

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  1. Bottazzi, Giulio & Dosi, Giovanni & Lippi, Marco & Pammolli, Fabio & Riccaboni, Massimo, 2001. "Innovation and corporate growth in the evolution of the drug industry," International Journal of Industrial Organization, Elsevier, vol. 19(7), pages 1161-1187, July.
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  4. Lux, T., . "The Limiting Extremal Behaviour of Speculative Returns: An Analysis of Intra-Daily Data from the Frankfurt Stock Exchange," Discussion Paper Serie B 436, University of Bonn, Germany, revised Jul 1998.
  5. Bottazzi, Giulio & Secchi, Angelo, 2003. "Why are distributions of firm growth rates tent-shaped?," Economics Letters, Elsevier, vol. 80(3), pages 415-420, September.
  6. Fields, Gary S. & Ok, Efe A., 1996. "The Meaning and Measurement of Income Mobility," Journal of Economic Theory, Elsevier, vol. 71(2), pages 349-377, November.
  7. George Sheldon & Martin Maurer, 1998. "Interbank Lending and Systemic Risk: An Empirical Analysis for Switzerland," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 134(IV), pages 685-704, December.
  8. Pagan, Adrian, 1996. "The econometrics of financial markets," Journal of Empirical Finance, Elsevier, vol. 3(1), pages 15-102, May.
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Cited by:
  1. Irle, Albrecht & Milaković, Mishael & Alfarano, Simone & Kauschke, Jonas, 2008. "A Statistical Equilibrium Model of Competitive Firms," Economics Working Papers 2008,10, Christian-Albrechts-University of Kiel, Department of Economics.
  2. Philip Hans Franses & Stephanie Vermeer, 2012. "Inequality amongst the wealthiest and its link with economic growth," Applied Economics, Taylor & Francis Journals, vol. 44(22), pages 2851-2858, August.
  3. Alfarano, Simone & Milaković, Mishael, 2008. "Does Classical Competition Explain the Statistical Features of Firm Growth?," Economics Working Papers 2008,03, Christian-Albrechts-University of Kiel, Department of Economics.
  4. Fiaschi, Davide & Marsili, Matteo, 2012. "Distribution of wealth and incomplete markets: Theory and empirical evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 81(1), pages 243-267.
  5. Sylvain Barde, 2012. "Back to the future: economic rationality and maximum entropy prediction," Studies in Economics 1202, Department of Economics, University of Kent.
  6. Giulio Bottazzi, 2007. "On the Pareto Type III distribution," LEM Papers Series 2007/07, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.

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