Risk-based pricing of loans is well-accepted. Left unstudied, however, is the conditional credit risk of a loan that remains current. Using large-sample statistics and asset-level consumer automobile asset-backed security data, we find that default risk conditional on survival converges for...

We test whether the six Euler conditions in Section 4.3 of the main paper are satisfied for 10 long-run reversal portfolios, 25 size/investment portfolios, 25 size/operating profitability portfolios and 10 industry portfolios. The tests for Euler conditions are consistent with the model and...

We propose an asset pricing model featuring time-varying limited participation in both bond and stock markets and household heterogeneity. Households face idiosyncratic income risks but participate in financial markets with a certain probability that depends on their individual income and on...

Considering the institutional factors of the German mutual fund market, we analyze equity fund holdings of German retail clients who received financial advice between 2005 and 2014 to investigate whether those investors overweight the bank-affiliated asset manager and if so, whether this...

The low degree of stock market participation (SMP) is one of the big puzzles in finance. Numerous determinants have been proposed. We put these determinants into a structure that is derived from a standard static portfolio model. Then we discuss arguments put forward regarding specific SMP...

Barro et al. (2022) investigate the quantity of safe assets held in the cross-section of developed countries and find that the average safe-asset ratio (ratio of safe assets to total assets) was 37% in 2015 and has remained relatively stable over time. They also document a crowding-out...

We study how investors respond to inflation combining a customized survey experiment with trading data at a time of historically high inflation. Investors' beliefs about the stock return-inflation relation are very heterogeneous in the cross section and on average too optimistic. Moreover, many...

Using administrative data on mortgages issued in Italy between 2018 and 2019, this paper estimates loan demand elasticities to maturity and interest rate. We find that households are responsive to both contract terms: a 1% decrease in interest rate increases the average loan size by 0.22%...

Using microdata from a U.S. household survey, we document that immigrants who lived through a sovereign default episode are 7% less likely to hold debt relative to otherwise similar immigrants who reside in the same U.S. state and come from the same foreign country but who did not experience a...

Investors' return expectations are pivotal in stock markets, but the reasoning behind these expectations remains a black box for economists. This paper sheds light on economic agents' mental models - their subjective understanding - of the stock market, drawing on surveys with the US general...