Purpose

How should private individuals manage their assets and liabilities? The course will allow you to understand the main principles, challenges, and tools of financial management, and to develop the ability to critically assess financial advice offered on the market.

Content

The course is divided in four parts:

Household balance sheets

Optimal wealth management needs to start from the full picture of client's finances. To gain insight of the heterogeneity in the finances of households, we will examine how their balance sheets vary over the lifecycle, by education and with wealth.

Household financial behavior

How do household take investment and borrowing decisions? A growing body of evidence provides a clearer and clearer picture of how households make financial choices. In particular, how much of resources households decide to consume, and how much to save; and, more specifically, how they choose their portfolios: the extent to which they decide to diversify, how they choose to tilt their portfolio for hedging purposes, and how they rebalance over time.

Portfolio allocation

Why, how much and how should household save? Portfolio allocation should be tailored to the means and needs of each household. In particular, we will cover which risk premia and anomalies should households harvest and how the exposure to risk factors should vary across households. We will also study how portfolio allocation should be rebalanced over time and over the lifecycle.

Liability management

Why, how much and how should household borrow? We will review models of optimal mortgage choice to identify how much households should borrow to purchase a home, and which types of mortgages they should use.

Course director: Paolo Sodini

Course Date & Time

Mondays and Wednesdays, 3 - 5 p.m. (Stockholm time)