Found 20 article(s) for author 'John Y. Campbell'

Sources of Inaction in Household Finance: Evidence from the Danish Mortgage Market

Sources of Inaction in Household Finance: Evidence from the Danish Mortgage Market. John Y. Campbell, March 2018, Paper, “A common problem in household finance is that households are often inactive in response to incentives. Mortgages are generally the largest household liability, and mortgage refinancing is an important channel for monetary policy transmission, so inactivity in this setting can be socially costly. We study how the Danish population responds to mortgage refinancing incentives between 2010 and 2014, building an empirical model that separately estimates time-dependent inaction (a low probability of responding to a refinancing incentive in a given quarter), and state-dependent inaction (a psychological addition to the financial cost of refinancing)Link

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Restoring Rational Choice: The Challenge of Consumer Financial Regulation

Restoring Rational Choice: The Challenge of Consumer Financial Regulation. John Y. Campbell, February 2016, Paper. “This lecture considers the case for consumer financial regulation in an environment where many households lack the knowledge to manage their financial affairs effectively. The lecture argues that financial ignorance is pervasive and unsurprising given the complexity of modern financial products, and that it contributes meaningfully to the evolution of wealth inequality. The lecture uses a stylized model to discuss the welfare economics of paternalistic intervention in financial markets, and discusses several specific examples including asset allocation in retirement savings, fees for unsecured short-term borrowing, and reverse mortgages.Link

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International Comparative Household Finance

International Comparative Household Finance. John Y. Campbell, August 15, 2015, Paper. “This paper reviews the literature on international comparative household finance. The paper presents summary statistics on household balance sheets for 13 developed countries, and uses these statistics to discuss common features and contrasts across countries. The paper then discusses retirement savings, investments in risky assets, unsecured debt, and mortgages.Link

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A Model of Mortgage Default

A Model of Mortgage Default. John Y. Campbell, July 23, 2015, Paper. “In this paper, we solve a dynamic model of households’ mortgage decisions incorporating labor income, house price, inflation, and interest rate risk. Using a zero-profit condition for mortgage lenders, we solve for equilibrium mortgage rates given borrower characteristics and optimal decisions. The model quantifies the effects of adjustable versus fixed mortgage rates, loan-to-value ratios, and mortgage affordability measures on mortgage premia and default. Mortgage selection by heterogeneous borrowers helps explain the higher default rates on adjustable-rate…Link

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Emerging Trends: Asset Pricing

Emerging Trends: Asset Pricing. John Y. Campbell, May 15, 2015, Paper. “The modern field of asset pricing is organized around the concept of the stochastic discount factor. This essay uses this framework to discuss the literature on predictability of asset returns in the short and long run, the influence of irrational investor expectations on asset prices, and the cross-section of stock returns. Future progress will require microeconomic data on investor actions and ideally survey evidence on their risk preferences and beliefs.” Link

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The Impact of Regulation on Mortgage Risk: Evidence from India

The Impact of Regulation on Mortgage Risk: Evidence from India. John Y. Campbell, September 2014, Paper. “We employ loan-level data on over a million loans disbursed in India between 1995 and 2010 to understand how fast-changing regulation impacted mortgage lending and risk. Our paper uses changes in regulatory treatment discontinuities associated with loan size and leverage to detect regulation-induced loan delinquencies. We also find that an acceleration in the classification of assets as non-performing resulted in substantially lower delinquency probabilities and losses given delinquency…” Link

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Inattention and Inertia in Household Finance: Evidence from the Danish Mortgage Market

Inattention and Inertia in Household Finance: Evidence from the Danish Mortgage Market. John Y. Campbell, July 2014, Paper. “This paper studies the refinancing behavior of Danish households during a recent period of declining interest rates. Danish data are particularly suitable for this purpose because the Danish mortgage system imposes few barriers to refinancing, and demographic and economic characteristics of mortgage borrowers can be accurately measured. The paper finds that household characteristics affect both inattention (a low responsiveness of mortgage refinancing to financial incentives) and inertia (a low unconditional probability of refinancing). Many characteristics…Link

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Monetary Policy Drivers of Bond and Equity Risks

Monetary Policy Drivers of Bond and Equity Risks. John Campbell, August 2013, Paper. “The exposure of US Treasury bonds to the stock market has moved considerably over time. While it was slightly positive on average in the period 1960-2011, it was unusually high in the 1980s and negative in the 2000s, a period during which Treasury bonds enabled investors to hedge macroeconomic risks. This paper explores the effects of monetary policy parameters and macroeconomic shocks on nominal bond risks, using a New Keynesian model with habit formation and discrete regime shifts in 1979 and 1997…”  Link verified March 28, 2014

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Financial Decisions and Markets: A Course in Asset Pricing

Financial Decisions and Markets: A Course in Asset Pricing. John Y. Campbell, August 2013, Book, “This manuscript is based on the second-year PhD course, Asset Pricing, that I have taught at Harvard for almost 20 years, and at Princeton for a decade before that. The subtitle of the book, A Course in Asset Pricing, is intended to convey not only the subject area, but also the approach: academic rather than practitioner-oriented, integrated rather than encyclopedic, and reflecting my personal views on what is most important to teach PhD students about the field” Link

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Aligning Incentives at Systemically Important Financial Institutions

Aligning Incentives at Systemically Important Financial Institutions. David Scharfstein, John Campbell, March 25, 2013, Paper. “UBS recently announced it would pay part of the bonuses of 6,500 highly compensated employees with bonds that would be forfeited if the bank does not meet its capital requirements. This memo underscores the benefits of contingent deferred compensation and makes recommendations for how such compensation should be structured at systemically important institutions. We also revise our proposal for contingent convertible bonds, explaining how these hybrid bonds…”  Link verified March 25, 2013

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