We introduce a dynamic banking-macro model, which abstains from conventional mean-reversion assumptions and in which - similar to Brunnermeier and Sannikov (2010) - adverse asset-price movements and their impact on risk premia and credit spreads can induce instabilities in the banking sector. To...

The prominent role of monetary policy in the U.S. interwar depression has been conventional wisdom since Friedman and Schwartz [1963]. This paper presents evidence on both the surprise and the systematic components of monetary policy between 1929 and 1933. Doubts surrounding GDP estimates for...

Bayesian learning provides a core concept of information processing in financial markets. Typically it is assumed that market participants perfectly know the quality of released news. However, in practice, news' precision is rarely disclosed. Therefore, we extend standard Bayesian learning...

Human capital investment is formed through households' endogenous decision, and competes with physical capital investment. Idiosyncratic shock shifts the skilled labor share and changes tightness in both skilled and unskilled markets. Given inelastic labor participation, the model can generate...

Recent studies proposed news about future technology growth as the main driver of macroeconomic fluctuations. The identification of these news through stock prices in SVARs has been criticized in the past. Therefore, I propose a series of experiments to test that hypothesis by examining its...

This paper sheds new light on herding of institutional investors by using a unique and superior database that identifies every transaction of financial institutions. First, the analysis reveals herding behavior of institutions. Second, the replica- tion of the analysis with low-frequent and...

A great proportion of stock dynamics can be explained using publicly available information. The relationship between dynamics and public information may be of nonlinear character. In this paper we offer an approach to stock picking by employing so-called decision trees and applying them to XETRA...

This paper employs a new and comprehensive data set to investigate short-term herding behavior of institutional investors. Using data of all transactions made by financial institutions in the German stock market, we show that herding behavior occurs on a daily basis. However, in contrast to...

We show that managerial overconfidence, which has been found to influence a number of corporate financial decisions, also affects corporate risk management. We find that managers increase their speculative activities using derivatives following speculative gains, while they do not reduce their...

Individuals in most industrialized countries have to make investment decisions throughout their adult life span to save for their retirement. These decisions substantially affect their living standards in old age. Research on cognitive aging has already demonstrated several changes in cognitive...