Luxury Goods and the Equity Premium

This paper evaluates the equity premium using novel data on the consumption of luxury goods. Specifying household utility as a nonhomothetic function of the consumption of both a luxury good and a basic good, we derive pricing equations and evaluate the risk of holding equity. Household survey and national accounts consumption data overstate the risk aversion necessary to match the observed equity premium because they mostly reflect basic consumption. The risk aversion implied by equity returns and the consumption of luxury goods is more than an order of magnitude less than that implied by national accounts data. For the very rich, the equity premium is much less of a puzzle.

Why Do Household Portfolio Shares Rise in Wealth?

We develop a life-cycle consumption and portfolio choice model in which households have nonhomothetic utility over two types of goods, basic and luxury. We calibrate the model to match the cross-sectional and life-cycle variation in the basic expenditure share in the Consumer Expenditure Survey. The model explains the degree to which the portfolio share in risky assets rises in wealth in the cross-section of households in the Survey of Consumer Finances. For a given household, the portfolio share can fall in response to an increase in wealth, even though the model implies decreasing relative risk aversion.

The Dilemma of the Open Gingival Embrasure Between Maxillary Central Incisors

Aim: The aim of this report is to present the etiology, diagnosis, and treatment planning strategy in the presence of an open gingival embrasure between the maxillary central incisors. Background: The open gingival embrasure or “black triangle” is a visible triangular space in the cervical region of the maxillary incisors. It appears when the gingival papilla does not completely fill in the interdental space. The space may occur due to: (1) disease or surgery with periodontal attachment loss resulting in gingival recession; (2) severely malaligned maxillary incisors; (3) divergent roots; or (4) triangular-shaped crowns associated with or without periodontal problems and alveolar bone resorptions. Report: The post-treatment prevalence in adult orthodontic patients is estimated to be around 40% compromising the esthetic result. Conclusion: Several methods of managing patients with open gingival embrasure exist, but the interdisciplinary aspects of treatment must be emphasized to achieve the best possible result. The orthodontist can play a significant role in helping to manage these cases

Luxury Goods and the Equity Premium

This paper evaluates the equity premium using novel data on the consumption of luxury goods. Specifying utility as a nonhomothetic function of both luxury and basic consumption goods, we derive pricing equations and evaluate the risk of holding equity. Household survey and national accounts data mostly reflect basic consumption, and therefore overstate the risk aversion necessary to match the observed equity premium. The risk aversion implied by the consumption of luxury goods is more than an order of magnitude less than that implied by national accounts data. For the very rich, the equity premium is much less of a puzzle