This paper offers a possible explanation for the conflicting empirical results in the literature concerning the relation between loan risk and collateral. Specifically, we posit that different economic characteristics or types of collateral pledges may be associated with the empirical dominance...

We provide two ways to reconcile small values of the intertemporal elasticity of substitution (IES) that range between 0.35 and 0.5 with empirical evidence that the IES is large. We do this reconciliation using a model in which all agents have identical preferences and the same access to asset...

We provide two ways to reconcile small values of the intertemporal elasticity of substitution (IES) that range between 0.35 and 0.5 with empirical evidence that the IES is large. We do this reconciliation using a model in which all agents have identical preferences and the same access to asset...

Using administrative, individual-level, longitudinal data from the state of Georgia, this paper finds that a documented worker employed by a firm that hires undocumented workers can expect to earn 0.15 percent less than if employed by a firm that does not hire undocumented workers. However, in...

Many have argued that laws that give borrowers additional rights can help prevent unnecessary foreclosures by giving borrowers more time to cure their delinquencies or by facilitating workouts. We first compare states that allow power-of-sale foreclosures with states that do not and find that...

The misevaluation of risk in securitized financial products is central to understanding the financial crisis of 2007–8. This paper characterizes the evolution of factors affecting collateralized debt obligations based on subprime mortgages. A key feature of subprime-mortgage backed indices is...

We present 12 facts about the mortgage crisis. We argue that the facts refute the popular story that the crisis resulted from finance industry insiders deceiving uninformed mortgage borrowers and investors. Instead, we argue that borrowers and investors made decisions that were rational and...

This paper assesses the trade-off between acquiring specialized skills targeted for a particular occupation and acquiring a package of skills that diversifies risk across occupations. Individual-level data on college credits across subjects and labor-market dynamics reveal that diversification...

Using administrative data from the state of Georgia, this paper finds that on average, among all firms, employing undocumented workers reduces a firm's hazard of exit by 19 percent. However, the impact varies greatly across sectors. In addition, a firm is at a distinct disadvantage if it does...

In this paper, we extend the parametric, asymmetric, stochastic volatility model (ASV), where returns are correlated with volatility, by flexibly modeling the bivariate distribution of the return and volatility innovations nonparametrically. Its novelty is in modeling the joint, conditional,...