WINTERSEMESTER 2015-16
Prof. Michael Haliassos, Ph.D.
Chair of Macroeconomics and Finance
(Secretary: Ms. Nagel, Room: 3.48, HoF 3 rd Floor, Tel: 798 33804)
Email: Haliassos@wiwi.uni-frankfurt.de
Office Hours: Monday, 16:00-17:00, Room 3.53, HoF
Dr. Ljubica Djordjevic
Room: 3.63, HoF 3 rd Floor, Tel: 798 33828
Email: djordjevic@safe.uni-frankfurt.de
Office Hours: Tuesday, 13:00-14:00
Mr. Johannes Wohlfart
Email: wohlfart@econ.uni-frankfurt.de
Office Hours: Monday, 15:00-16:00, Room 3.62
This seminar presents topics in the modern and rapidly growing area of Household
Finance, on the interface between Macroeconomics and Finance. This is not only an active area of frontier academic research, but also interesting and useful to people working in the financial and policy sector, including central banks, commercial banks, insurance companies, pension funds, and large brokers.
The broad overall theme of the topics presented is household financial behavior, namely analysis of household demand for assets and for loans. Gone are the days when household portfolios consisted of a bank account and a home for the vast majority of households. Households now build much more elaborate portfolios, not least in order to supplement the limited pension given by the social security system; and they are willing to undertake a lot more risk than before, sometimes with detrimental consequences, including financial crises. Understanding what determines household asset and debt choices and behavior is of paramount importance for academics and practitioners alike, and has been made much easier by the recent introduction of a number of data sources.
The seminar should appeal to a wide range of students, from those interested in understanding household preferences regarding financial products that can be of use in financial sector jobs, to those who are more academically oriented and who want to study intertemporal portfolio selection in the face of uninsurable labor income risk.
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The seminar grade will be based on three methods of assessment:
1.
Presentation (35%): You will be paired with another student registered in the course and you will give a 30-minute presentation (including questions and discussion) in
English. Common grade for both presenters.
2.
Paper (35%): A write-up of the presentation (in English or German). Page limit: 7
A4 pages of text, double-spaced. Joint paper by the two presenters (common grade).
3.
Examination (30%): The exam will be based on the readings below indicated with a double asterisk (**). You can answer the questions in English or in German.
You will not be graded on the quality of your English, but you should know enough English to communicate your knowledge of the material to the instructors.
This block seminar will take place on campus, in Seminarhaus (SH 0.106) on 25.1.16, from
10:00 to 18:00 . There is an enrollment limit of 30 students for the course.
Students will be arranged in pairs to prepare the presentation and the accompanying paper.
The same grade will be awarded to both members of the assigned pair, reflecting quality of the presentation and of the paper. Therefore, it is the responsibility of team members to ensure that both partners do their fair share of work.
There will be an organizational meeting on Friday 6.11.15 from 12:00-13:00 in Room 1.27,
House of Finance. The selection of seminar topic starts following this meeting, at 13:00 (see below).
1.
Friday 6.11.15 from 12:00-13:00 in Room 1.27, House of Finance: Information meeting.
2.
Friday 6.11.15 from 13:00 to Friday 13.11.15, 12:00: Email (jointly from both members of the team) to select topic for the course (on a first-come, first-served basis): email: dnagel@wiwi.uni-frankfurt.de
). Please state 3 topics, in order of preference.
3.
Friday 20.11.15, 16:00: Final deadline for allocation of thesis topic and team.
4.
Monday 25.1.16: 10-18: Seminar Presentations in Seminarhaus, Room SH 0.106
5.
Wednesday 27.1.16: Submission deadline for the paper (presentation write-up). The paper should be emailed and also submitted in hardcopy to Ms. Nagel by 12:00 noon.
6.
Friday 29.1.16: Seminar examination, 10:00-12:00 in HoF 3.48 (Sydney).
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TOPICS AND REFERENCES
1.
What explains stock market non-participation? Are the same factors relevant for poorer and richer non-participants?
Haliassos, Michael, 2002. “Stockholding: Recent Lessons from Theory and
Computations” in Guiso, Luigi, Michael Haliassos, and Tullio Jappelli (Eds.),
Stockholding in Europe, Palgrave Macmillan, 2002.
Haliassos, Michael and Carol C. Bertaut, 1995, Why do so few hold stocks?, The
Economic Journal, 105, 1110-1129.
**Campbell, John Y. (2006). “Household Finance”, Journal of Finance , 61, 1553-
604. (Available from: http://kuznets.fas.harvard.edu/~campbell/papers.html
)
Luigi Guiso, Paola Sapienza and Luigi Zingales (2008) “Trusting the Stock Market”,
Journal of Finance.
Guiso Luigi and Tullio Jappelli (2005) “Awareness and Stock Market Participation”,
Review of Finance.
Dominitz, Jeff and Charles F. Manski (2007). "Expected Equity Returns and Portfolio
Choice: Evidence from the Health and Retirement Study," Journal of the
European Economic Association, vol. 5(2-3), pp. 369-379.
Barberis, N., Huang, M. and Thaler, R. (2006). "Individual Preferences, Monetary
Gambles, and Stock Market Participation: A Case for Narrow Framing",
American Economic Review, 96, 1069-1090.
2.
Do similar households in different countries hold similar portfolios?
**Christelis, Dimitris, Dimitris Georgarakos, and Michael Haliassos, “Differences in
Portfolios Across Countries: Economic Environment versus Household
Characteristics”, Review of Economics and Statistics , 95(1), March 2013, pp.
220-36.
The Eurosystem Household Finance and Consumption Survey: Results from the First
Wave, ECB Statistics Paper No. 2, April 2013. (Available from: http://www.ecb.europa.eu/home/html/researcher_hfcn.en.html
).
Guiso, L., M. Haliassos and T. Jappelli, 2002. “Introduction” in Household Portfolios.
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Guiso, L., M. Haliassos and T. Jappelli, 2002. “Stockholding in Europe: Where Do
We Stand and Where Do We Go?”, Economic Policy, April 2003, 117-64.
3.
Why do the rich invest so much in private businesses?
**Dynan, K., J. Skinner, and S. Zeldes, 2004. “Do the Rich Save More?”, Journal of
Political Economy , vol. 112, pp. 397-444.
Carroll, Chris, 2002. “Portfolios of the Rich”, in Household Portfolios.
Nikolai Roussanov (2010). “Diversification and its Discontents: Idiosyncratic and
Entrepreneurial Risk in the Quest for Social Status”, Journal of Finance .
Wachter, Jessica A. and Motohiro Yogo (2010). “Why Do Household Portfolio
Shares Rise in Wealth?”, Review of Financial Studies , 23(11): 3929–65.
Heaton, John and Deborah Lucas, 2000. “Portfolio Choice and Asset Prices: The
Importance of Entrepreneurial Risk”, Journal of Finance, 55, 1163-1198.
4.
Do households overtrade in the stock market?
Barber, B.M., Odean, T. 2000. Trading is hazardous to your wealth: the common stock investment performance of individual investors. Journal of Finance, LV,
773–806.
Barber, Brad M. and Terrance Odean (2001). “Boys will be Boys: Gender,
Overconfidence, and Common Stock Investment”, Quarterly Journal of
Economics , 116, No. 1, 261-92.
Agnew, J., Balduzzi, P., Sundén, A. (2003). Portfolio choice and trading in a large
401(k) plan. American Economic Review , 193-205.
Bilias, Yannis, Dimitris Georgarakos, and Michael Haliassos (2010). “Portfolio
Inertia and Stock Market Fluctuations”, Journal of Money, Credit and
Banking , pp. 715-42.
Grinblatt, Mark and Matti Keloharju (2001). “What Makes Investors Trade?”, Journal of Finance , LVI, 589-616.
**Calvet, L., J.Y. Campbell, and P. Sodini (2009). “Fight or Flight? Portfolio
Rebalancing by Individual Investors”, Quarterly Journal of Economics 124, pp. 301-348.
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Keloharju Matti and Mark Grinblatt (2009). “Sensation seeking, overconfidence, and trading activity”, Journal of Finance , 64(2), 549-578.
5.
Do US households borrow on credit cards only if they are in financial need?
**Bertaut, Carol C. and Michael Haliassos, “Credit Cards: Facts and Theories”, in
Giuseppe Bertola, Richard Disney, and Charles Grant (Eds.), The Economics of Consumer Credit, Cambridge, MA: MIT Press, 2006.
Gross, David B. and Nicholas S. Souleles (2002a). “Do Liquidity Constraints and
Interest Rates Matter for Consumer Behavior? Evidence from Credit Card
Data”, Quarterly Journal of Economics, 149-85.
Bertaut, Carol C., Michael Haliassos, and M. Reiter (2009). “Credit Card Debt Puzzles and
Debt Revolvers for Self-Control”, Review of Finance, 13, 657-92 .
Meier, Stephan, and Charles Sprenger. "Present-Biased Preferences and Credit Card
Borrowing." American Economic Journal 2, no. 1 (2010): 193-210.
Gathergood, John and Joerg Weber (2014). “Self-control, Financial Literacy, and the
Co-holding Puzzle”, Journal of Economic Behavior and Organization , 107,
455-469.
Teluykova, Irina (2013). "Household Need for Liquidity and the Credit Card Debt
Puzzle", Review of Economic Studies , 80(3), 1148-1177.
Laibson, David, Andrea Repetto, and Jeremy Tobacman (2004). “A Debt Puzzle”, in
Philippe Aghion, Roman Frydman, Joseph Stiglitz, and Michael Woodford
(Eds.), Knowledge, Information, and Expectations in Modern Economics: In
Honor of Edmund S. Phelps.
6.
Are household financial mistakes caused by financial illiteracy?
Calvet LE, Campbell JY, Sodini P. (2009). “Measuring the financial sophistication of households”, American Economic Review, 99(2): 393-98.
Calvet, Laurent, John Y. Campbell, and Paolo Sodini (2007). “Down or Out:
Assessing the Welfare Costs of Household Investment Mistakes”, Journal of
Political Economy , 115, pp. 707-747.
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Lusardi, Annamaria and Olivia S. Mitchell (2007). “Baby Boomer Retirement
Security: The roles of planning, financial literacy, and housing wealth”,
Journal of Monetary Economics , 54, 205-24.
**Rooij, M. van, A. Lusardi and R. Alessie (2011), “Financial literacy and stock market participation”, Journal of Financial Economics, 101(2), pp. 449-472.
Choi J, Laibson D, Madrian B. (2011). “$100 bills on the sidewalk: suboptimal investment in 401(k) plans”, Review of Economics and Statistics 93(3): 748-
63.
Rooij, M. van, Lusardi A, Alessie R. (2012). “Financial literacy, retirement planning, and wealth accumulation”, Economic Journal, 122(5): 449-78.
7.
Should we undertake financial education programs for households?
**Hastings, Justine, Brigitte Madrian, and William Skimmyhorn (2012). “Financial
Literacy, Financial Education, and Economic Outcomes”, NBER Working
Paper 18412.
Lusardi, Annamaria and Olivia Mitchell (2007). “Financial Literacy and Retirement
Preparedness: Evidence and Implications for Financial Education”, Business
Economics , vol. 42(1) pp. 35-44.
(Available from http://www.dartmouth.edu/~alusardi/Papers/Financial_Literacy.pdf
)
Lusardi, Annamaria and Olivia Mitchell (2008). "Planning and Financial Literacy:
How Do Women Fare?", American Economic Review , 98(2), pp. 413-417.
Willis LE. (2011). “The financial education fallacy”, American Economic Review
Papers and Proceedings, 101(3): 429-34.
Beshears J, Choi J, Laibson D, Madrian BC (2008). “The importance of default options for retirement saving outcomes: evidence from the United States”. In
Lessons from Pension Reform in the Americas, ed. S. Kay, T. Sinha. pp. 59-
87. Oxford: Oxford University Press.
8.
Do social interactions influence portfolio choices?
Hong, H., J. Kubik and J. Stein, “Social Interaction and Stock-Market Participation”,
Journal of Finance 59 (2004), 137-163.
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**Duflo, Esther, and Emmanuel Saez, "Participation and Investment Decisions in a
Retirement Plan: the Influence of Colleagues' choices" with Esther Duflo,
Journal of Public Economics , 85, 2002, 121-148.
Kuhn, P., Kooreman, P., A. Soetevent, and Kapteyn, A. (2011). “The Effects of
Lottery Prizes on Winners and Their Neighbors: Evidence from the Dutch
Postcode Lottery”, American Economic Review , 101, 2226-47.
Georgarakos, Dimitris, Michael Haliassos, and Giacomo Pasini, “Household Debt and
Social Interactions”, Review of Financial Studies , 27(5), May 2014, pp. 1404-
33.
Kaustia, M. and S. Knüpfer (forthcoming). “Peer Performance and Stock Market
Entry”, Journal of Financial Economics .
9.
Do financial advisors add value to investor accounts?
**Campbell J., Jackson H., Madrian B., and Tufano P. (2011). “Consumer Financial
Protection”, Journal of Economic Perspectives. 25(1): 91-114.
Inderst, Roman and Marco Ottaviani (2009). “Misselling Through Agents”, American
Economic Review.
Hackethal, Andreas, Michael Haliassos, and Tullio Jappelli, “Financial Advisors: A
Case of Babysitters?”, Journal of Banking and Finance , 36(2), 509-24.
Bhattacharya, U., Hackethal, A., Kaesler, S., Loos, B., and Meyer, S. (2012). “Is
Unbiased Financial Advice to Retail Investors Sufficient? Answers from a
Large Field Study”, Review of Financial Studies , 24, 975 – 1032.
Mullainathan S., Noeth M., Shoar A. (2012). “The market for financial advice: an audit study”, NBER Working Paper 17929.
Bergstresser, D., Chalmers, D. and Tufano, P. (2009). “Assessing the Costs and
Benefits of Brokers: A Preliminary Analysis of the Mutual Fund Industry”,
Review of Financial Studies , 22, 4129-56.
10.
What makes households overborrow or default on loan payments?
Gross, David B. and Nicholas S. Souleles (2002b). “An Empirical Analysis of
Personal Bankruptcy and Delinquency”, The Review of Financial Studies, 15,
319-47.
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Bertaut, Carol C. and Michael Haliassos, “Credit Cards: Facts and Theories”, in
Giuseppe Bertola, Richard Disney, and Charles Grant (Eds.), The Economics of Consumer Credit, Cambridge, MA: MIT Press, 2006.
Durkin, Thomas (2000). “Credit Cards: Use and Consumer Attitudes, 1970-2000”,
Federal Reserve Bulletin, September, 623-34.
Lusardi A, Tufano P. (2015). “Debt literacy, financial experiences, and overindebtedness”, Journal of Pension Economics and Finance , Special Issue on Household Finance (lead paper).
Fay, Scott, Eric Hurst, and Michelle White (2002). “The Household Bankruptcy
Decision”, American Economic Review , 92, 708-18.
**Gross, David B. and Nicholas S. Souleles (2002a). “Do Liquidity Constraints and
Interest Rates Matter for Consumer Behavior? Evidence from Credit Card
Data”, Quarterly Journal of Economics, 149-85.
11.
What is the interaction between Housing, Portfolio Choice, and Mortgage Default?
Fratantoni, Michael C., 2001, Homeownership, committed expenditure risk, and the stockholding puzzle, Oxford Economic Papers 53, 241–259.
Flavin, M. and Yamashita, T. (2002). “Owner-Occupied Housing and the Composition of the
Household Portfolio”, American Economic Review , 92(1): 345-62.
Campbell, J. Y. and Cocco, J. F. (2003). “Household Risk Management and Optimal
Mortgage Choice”, Quarterly Journal of Economics, 118:1449-94.
Cocco, J. (2005). “Portfolio Choice in the Presence of Housing”, Review of Financial Studies ,
18, 535-67.
**Mian, Atif, and Amir Sufi (2009). “The Consequences of Mortgage Credit Expansion:
Evidence from the U.S. Mortgage Default Crisis”, Quarterly Journal of Economics ,
124, 1449-96.
Elul, Ronel, Nicholas S. Souleles, Souphala Chomsisengphet, Dennis Glennon, and Robert
Hunt (2010). “What Triggers Mortgage Defaults." American Economic Review :
Papers & Proceedings , 100, 490-94.
Guiso, Luigi, Paola Sapienza, and Luigi Zingales (2011). “The Determinants of Attitudes
Towards Strategic Default on Mortgages”, Journal of Finance , 68(4): 1473-1515.
Mian, A. and Sufi A. (2011). “House Prices, Home Equity Based Borrowing, and the U.S.
Household Leverage Crisis”, American Economic Review , 101, 2132-56.
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