Home owners are about twice as likely as renters to participate in the stock market, both in the USA and Sweden. This paper sets up a life-cycle portfolio choice model which generates this pattern of limited stock market participation. Calibrated to Swedish data, the model generates the stock...

We develop a model of asset pricing assuming that investor's behavior is habit forming. The model predicts that the effect of consumption growth shocks on the risk premium depends on the business cycle phase of the economy. This empirical implication is tested with a Markov-switching VAR model...

By extending Cumulant Generating Function-based pricing formulas to a two-good economy (non-housing and housing) we obtain closed-form solutions for asset prices. Estimating the model over the period 1959 – 2018, we show that rare booms and busts events in housing expenditures is determinant...

The seminal contribution by Kiyotaki and Moore (1997) has spurred a vast literature on the importance of collateral constraints in propagating and amplifying shocks to the economy. However, most papers in the literature using collateral constraints assume non-state contingent debt, i.e., markets...

Previous writers have attempted to resolve the equity premium puzzle by employing a utility function that depends on current consumption minus (or relative to) past habit consumption. This paper points out that an individual's current utility may also depend upon how well off in the recent past...

During the Great Recession, the collapse of consumption across the US varied greatly but systematically with house-price declines. Our message is that household financial health matters for understanding this relationship. Two facts are essential for our finding: (1) the decline in house prices...

During the Great Recession, the collapse of consumption across the U.S. varied greatly but systematically with house-price declines. We find that financial distress among U.S. households amplified the sensitivity of consumption to house-price shocks. We uncover two essential facts: (1) the...

Evidence suggests that human psychology plays a role in individuals' financial decisions, with economically meaningful consequences observed even at the aggregate market level. This chapter considers many instances whereby human mood induced by exogenous factors is associated with economically...

This article addresses the issue concerning the application of Regulation (EU) 1286/2014 of the European Parliament and of the Council of 26 November 2014 “on key information documents for packaged retail and insurance based investment products (PRIIPs)” in relation to callable corporate...

Is wider access to stockholding opportunities related to reduced wealth inequality, given that it creates challenges for small and less sophisticated investors? Counterfactual analysis is used to study the influence of changes in the US stockholder pool and economic environment, on the...