Laurent Bach, Laurent Calvet, Paolo Sodini, 07 July 2017

A growing literature conjectures that wealthy households earn higher average returns, which can further exacerbate wealth inequality. Using Swedish administrative data, this column shows that the wealthy indeed earn higher returns on their asset portfolios. These high returns are primarily due to high levels of compensated risk. Households at the top of the wealth distribution further exhibit highly heterogeneous investment performance due to high levels of idiosyncratic risk.