{"status":"ok","message-type":"work","message-version":"1.0.0","message":{"indexed":{"date-parts":[[2026,10,27]],"date-time":"2026-10-27T14:34:45Z","timestamp":1793111685559,"version":"4.5.0"},"posted":{"date-parts":[[2022]]},"group-title":"SSRN","reference-count":72,"publisher":"Elsevier BV","content-domain":{"domain":[],"crossmark-restriction":false},"short-container-title":[],"abstract":"<jats:p>We examine undiversified portfolios in a production economy with financial frictions. Households concentrate holdings in single firms due to managerial incentives and private control benefits. Matching return and portfolio data, we find undiversified risk explains a third of the equity premium level and a quarter of its volatility. Equity issuance costs and borrowing constraints for firms amplify the effects of under-diversification and allow the model to match the high volatility of equity returns and the low volatility of corporate payouts.&amp;nbsp; Full diversification would raise risk-free rates, lower risk premiums and capital accumulation, but increase consumption. Relative to a model that only features idiosyncratic labor income risk, our model matches equity returns with substantially smaller fundamental risks and risk aversion.<\/jats:p>","DOI":"10.2139\/ssrn.4236861","type":"posted-content","created":{"date-parts":[[2022,10,16]],"date-time":"2022-10-16T10:15:00Z","timestamp":1665915300000},"source":"Crossref","is-referenced-by-count":0,"title":["Asset Pricing with Under-Diversification"],"prefix":"10.2139","author":[{"ORCID":"https:\/\/orcid.org\/0000-0002-9690-6987","authenticated-orcid":true,"given":"Vadim","family":"Elenev","sequence":"first","affiliation":[],"role":[{"vocabulary":"crossref","role":"author"}]},{"given":"Tim","family":"Landvoigt","sequence":"additional","affiliation":[],"role":[{"vocabulary":"crossref","role":"author"}]}],"member":"78","reference":[{"issue":"3","key":"ref1","doi-asserted-by":"crossref","first-page":"1471","DOI":"10.3982\/ECTA15142","article-title":"Asset Pricing With Endogenously Uninsurable Tail Risk","volume":"89","author":"H Ai","year":"2021","journal-title":"Econometrica"},{"issue":"4","key":"ref2","doi-asserted-by":"crossref","first-page":"1408","DOI":"10.1093\/rfs\/hhac059","article-title":"A Quantitative Model of Dynamic Moral Hazard","volume":"36","author":"H Ai","year":"2023","journal-title":"The Review of Financial Studies"},{"key":"ref3","first-page":"1","volume":"63","author":"R Albuquerque","year":"2008","journal-title":"Agency Conflicts, Investment, and Asset Pricing"},{"issue":"1","key":"ref4","doi-asserted-by":"crossref","first-page":"1","DOI":"10.1016\/j.red.2006.11.001","article-title":"Uninsured idiosyncratic investment risk and aggregate saving","volume":"10","author":"G.-M Angeletos","year":"2007","journal-title":"Review of Economic Dynamics"},{"issue":"5","key":"ref5","doi-asserted-by":"crossref","first-page":"2049","DOI":"10.1086\/701792","article-title":"Financial Frictions and Fluctuations in Volatility","volume":"127","author":"C Arellano","year":"2019","journal-title":"Journal of Political Economy"},{"issue":"9","key":"ref6","doi-asserted-by":"crossref","first-page":"2703","DOI":"10.1257\/aer.20170666","article-title":"Rich Pickings? 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