We assess the effects of monetary policy on bank risk to verify the existence of a risk-taking channel — monetary expansions inducing banks to assume more risk. We first present VAR evidence confirming that this channel ...

We consider the continuous-time portfolio optimization problem of an investor with constant relative risk aversion who maximizes expected utility of terminal wealth. The risky asset follows a jump-diffusion model with a ...

This paper compares two classes of models that allow for additional channels of correlation between asset returns: regime switching models with jumps and models with contagious jumps. Both classes of models involve a hidden ...

Homestead exemptions to personal bankruptcy allow households to retain their home equity up to a limit determined at the state level. Households that may experience bankruptcy thus have an incentive to bias their portfolios ...

We analyze the consequences of consumer education on prices and welfare in retail financial markets when some consumers are naive about shrouded addon prices and banks try to exploit this. Allowing for different information ...

Previous research has documented strong peer effects in risk taking, but little is known about how such social influences affect market outcomes. Since the consequences of social interactions are hard to isolate in financial ...

This paper investigates whether exchanging the Social Security delayed retirement credit, currently paid as an increase in lifetime annuity benefits, for a lump sum would induce later claiming and additional work. We show ...

This paper reports that credit cycles emerged in laboratory economies that were not hit by aggregate shocks and in which information about fundamentals was perfect. This main result is in our view puzzling because standard ...

In a production economy with trade in financial markets motivated by the desire to share labor-income risk and to speculate, we show that speculation increases volatility of asset returns and investment growth, increases ...

We offer evidence of a new stylized feature of corporate financing decisions: the tendency of managers to rely more on debt financing when earnings prospects are poor. We term this 'leaning against the wind' and consider ...