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Purpose – The purpose of this chapter is to assess the role of the wealth-to-income ratio in forecasting housing risk premium.

Methodology/approach – To investigate this issue, the chapter uses the residuals of the trend relationship among asset wealth and labor income to predict future real housing returns. It shows that deviations of asset wealth from its cointegrating relationship with labor income, wy, track time-variation in expected housing returns.

Findings – Using data for a set of industrialized countries, this chapter finds that if agents are hit by a shock that generates a fall in the wealth-to-income ratio, they will demand (i) a higher housing risk premium when housing assets are complements of financial assets and (ii) a lower housing risk premium when housing assets are substitutes of financial assets.

Originality/value of chapter – The findings of this chapter are novel in the field of alternative finance and, in particular, durable (housing) finance. Indeed, they build on a representative agent's theoretical model to infer about the degree of substitution or complementarity between financial and housing assets, which, in turn, can be useful at developing investment strategies for hedging against the risk of unfavorable housing fluctuations. Additionally, they open a new research avenue for understanding the determinants of housing risk premium by linking the dynamics of asset wealth and labor income with the behavior of future housing returns.

Purpose – Study the investment and risk management approach of sovereign wealth funds when national wealth including natural resources is accounted for rather than only financial asset.

Methodology/Approach – Using a range of widely used asset classes, we simulate sovereign wealth fund returns when considering only financial assets but also under varying levels of national wealth holdings in oil. We optimize two-asset financial portfolios and three-asset portfolios when including oil to maximize the risk-adjusted returns.

Findings – Sovereign wealth funds by failing to invest for the national wealth portfolio are overlooking a major source of volatility. To reduce the level of volatility associated with yearly national wealth returns, allocating a higher percentage of fixed assets to high-quality fixed income and low-risk equities will maximize the risk-adjusted returns of national wealth for sovereign wealth fund states.

Social implications – By focusing solely on the financial assets managed by sovereign wealth funds, states are exposing themselves to significant national wealth risk.

Originality/Value of the paper – This is the first work to estimate the impact on national wealth of oil-dependent states by failing to account for volatile commodity prices through the investment strategies of sovereign wealth funds.

I find that median wealth plummeted over the years 2007–2010, and by 2010 was at its lowest level since 1969. The inequality of net worth, after almost two decades of little movement, was up sharply from 2007 to 2010. Relative indebtedness continued to expand from 2007 to 2010, particularly for the middle class, though the proximate causes were declining net worth and income rather than an increase in absolute indebtedness. In fact, the average debt of the middle class actually fell in real terms by 25 percent. The sharp fall in median wealth and the rise in inequality in the late 2000s are traceable to the high leverage of middle-class families in 2007 and the high share of homes in their portfolio. The racial and ethnic disparity in wealth holdings, after remaining more or less stable from 1983 to 2007, widened considerably between 2007 and 2010. Hispanics, in particular, got hammered by the Great Recession in terms of net worth and net equity in their homes. Households under age 45 also got pummeled by the Great Recession, as their relative and absolute wealth declined sharply from 2007 to 2010.

This chapter and case study examine how and which structured elements of an employee-owned business contribute to building the economic security and asset wealth of the lowest-wage and skilled employees of the firm. It paves the way for greater understanding about how intentionally structured workplaces can address wealth inequality and economic security through income and non-income opportunity systems.

The study draws upon qualitative interviews with four members of management, two plant managers, and 12 low-income employee-owners. Company documents and confidential employee data were provided for direct research analysis. Interviews took place at company locations, and covered employees from all shifts.

Employee ownership structures provide an important tool for advancing policy support and management practices to rebuild the wealth building benefits of work for low-income workers.

To ensure confidentiality, the study is anonymized and does not directly draw on the worker-owner interviews. This limits the opportunity to demonstrate the effect of structure on workforce; nonetheless, the empirical data tell an important story.

Expanding wealth inequality and economic precarity among low- and moderate-income workers has raised broad debates about how shifts in the structure of work, through new business, capital, and ownership structures, may be contributing to these social problems.

The employee benefits of employee ownership are not fully studied. This case contributes to understanding how employee ownership may reduce gender and racial wealth gaps, build family well-being, and become a model for structuring opportunity for those traditionally left out of the economic mainstream.

Purpose – This chapter explores the relationship between religious affiliation and wealth ownership focusing on generational differences.

Methodology – I use data from the National Longitudinal Survey of Youth and the Health and Retirement Study to create descriptive statistics and regression analyses of the association between religious affiliation in childhood and adulthood for people of two cohorts.

Findings – This chapter shows that there are important patterns by religious affiliation in total net worth, real assets, and asset allocation across generations. My findings are consistent with past work on religion and wealth ownership showing that Jews, mainline Protestants, and white Catholics tend to have higher total wealth than other groups. In addition, I find that black Protestants, Hispanic Catholics, and conservative Protestants tend to have relatively low wealth, consistent with research on religion, race/ethnicity, and wealth. My findings also show that these patterns are relatively robust across generations.

Research implications – The findings are relevant to research on inequality, wealth accumulation and saving, life course processes, and the effect of religion on stratification outcomes.

Originality/Value – This research shows how religious affiliation and wealth are related across generations.

Using harmonized wealth data and a novel decomposition approach in this literature, we show that cohort effects exist in the income profiles of asset and debt portfolios for a sample of European countries, the United States, and Canada. We find that the association between household wealth portfolios at the intensive margin (the level of assets) and household characteristics is different from that found at the extensive margin (the decision to own). Characteristics explain most of the cross-country differences in asset and debt levels, except for housing wealth, which displays large unexplained differences for both the under-50 and over-50 populations. However, there are cohort differences in the drivers of wealth levels. We observe that younger households’ levels of wealth, given participation, may be more responsive to the institutional setting than mature households. Our findings have important implications, indicating a scope for policies which can promote or redirect investment in housing for both cohorts and which promote optimal portfolio allocation for mature households.

Purpose – The purpose of this chapter is to assess the role of collateralizable wealth and systemic risk in explaining future asset returns.

Methodology/approach – To test this hypothesis, the chapter uses the residuals of the trend relationship among housing wealth and labor income to predict both stock returns and government bond yields. Specifically, it shows that nonlinear deviations of housing wealth from its cointegrating relationship with labor income, hwy, forecast expected future returns.

Findings – Using data for a set of industrialized countries, the chapter finds that when the housing wealth-to-income ratio falls, investors demand a higher risk premium for stocks. As for government bond returns: (i) when they are seen as a component of asset wealth, investors react in the same manner and (ii) if, however, investors perceive the increase in government bond returns as signaling a future rise in taxes or a deterioration of public finances, then they interpret the fall in the housing wealth-to-income ratio as a fall in future bond premia. Finally, this work shows that the occurrence of crisis episodes amplifies the transmission of housing market shocks to financial markets.

Originality/value of chapter – These findings are novel. They also open new and challenging avenues for understanding the dynamics of the relationship between the housing sector, stock market and government bond developments, and the banking system.

Industrial feudalism is a socio-economic formation of advanced capitalist countries in which society becomes stratified into closed, hierarchically-defined social groups. In the writings of Ludwik Krzywicki and Oskar Lange, industrial feudalism is associated with the dominance of monopoly finance capital. The chapter extends this analysis of twenty-first century capitalism in which social groups are differentiated by the kind of property that they own and hence the kind of credit to which they have access to prevent becoming déclassé. However asset inflation then inhibits upward social mobility, confining households to their inherited social class. This inhibits labour mobility. But the availability of credit for the propertied classes also defines attitudes towards state welfare provision.

The distribution of income and wealth are generally regarded as key performance indicators of a society. Cross-sectional analyses of Australian income and wealth distributions at various points in time have found that both are highly unequal. However, lifetime distributions may be quite different. This paper provides some insight into the differences for one of these distributions – wealth.

A dynamic microsimulation model of the Australian population is used to project the cross-sectional and lifetime asset holdings of a 5-year birth cohort over a period of 40 years. The annual personal net worth of this birth cohort are analysed in regard to age and net worth, the changing wealth distribution within the cohort, wealth mobility, and a comparison of lifetime and cross-sectional distributions.

Do women exhibit greater financial risk aversion than men? We answer this question using attitudinal and behavioral specifications of risk aversion drawn from the 2010 Survey of Consumer Finances (SCF). To approximate attitudinal specification of risk aversion, we use individuals’ self-reported financial risk tolerance. We use individuals’ relative risk aversion, that is, the effect of wealth on the proportion of assets categorized as risky as behavioral specification of risk aversion. We find that while women display greater attitudinal risk aversion, gender difference in behavioral risk aversion depends upon individuals’ marital status and role in household finances. Single women exhibit greater behavioral risk aversion compared to single men. However, this gender difference does not exist when we compare behavioral risk aversion of married women and men in charge of household finances.