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Commodities, Financialization, and Heterogeneous Agents
(2016-04-28)
The term 'financialization' describes the phenomenon that commodity contracts are traded for purely financial reasons and not for motives rooted in the real economy. Recently, financialization has been made responsible for ...
Preference Evolution and the Dynamics of Capital Markets
(2016-05-13)
This paper introduces endogenous preference evolution into a Lucas-type economy and explores its consequences for investors' trading strategy and the dynamics of asset prices. In equilibrium, investors herd and hold the ...
Optimal Consumption and Portfolio Choice with Loss Aversion
(2016-05-16)
This paper analyses the consumption-investment problem of a loss averse investor equipped with s-shaped utility over consumption relative to a time-varying reference level. Optimal consumption exceeds the reference level ...
Predictors and Portfolios Over the Life Cycle
(2018-06-08)
In a calibrated consumption-portfolio model with stock, housing, and labor income predictability, we evaluate the welfare effects of predictability on life-cycle consumption-portfolio choice. We compare skilled investors ...
Taring All Investors with the Same Brush? Evidence for Heterogeneity in Individual Preferences from a Maximum Likelihood Approach
(2015-05-19)
Abstract. Microeconomic modeling of investors behavior in financial markets and its results crucially depends on assumptions about the mathematical shape of the underlying preference functions as well as their parameterizations. ...
Systemic Co-Jumps
(2016-10-10)
The simultaneous occurrence of jumps in several stocks can be associated with major financial news, triggers short-term predictability in stock returns, is correlated with sudden spikes of the variance risk premium, and ...
International Capital Markets with Time-Varying Preferences
(2017-08-02)
We propose a 2-country asset-pricing model where agents' preferences change endogenously as a function of the popularity of internationally traded goods. We determine the effect of the time-variation of preferences on ...
The Impact of Biases in Survival Beliefs on Savings Behavior
(2017-03-24)
"On average young people ""undersave"" whereas old people ""oversave"" with respect to the rational expectations model of life-cycle consumption and savings. According to numerous studies on subjective survival beliefs, ...
Liquidity Premia in CDS Markets
(2017-07-14)
We develop a state-space model to decompose bid and ask quotes of CDS into two components, fair default premium and liquidity premium. This approach gives a better estimate of the default premium than mid quotes, and it ...
Consumption-Portfolio Choice with Preferences for Cash
(2018-07-12)
This paper studies a consumption-portfolio problem where money enters the agent's utility function. We solve the corresponding Hamilton-Jacobi-Bellman equation and provide closed-form solutions for the optimal consumption ...