Showing results 1 - 10 of 24
| John Y. Campbell
August 2020, Paper: "We study mortgage design features aimed at stabilizing the macroeconomy. We model overlapping generations of mortgage borrowers and an infinitely lived risk-averse representative mortgage lender. Mortgages are priced using an equilibrium pricing kernel derived from the lender’s endogenous consumption. We consider an adjustable-rate mortgage (ARM) with an option that during recessions allows borrowers to pay only interest on…
| John Y. Campbell
January 2020, Paper: "We show that reaching for yield a tendency to take more risk when the real interest rate declines while the risk premium remains constant results from imposing a sustainable spending constraint on an otherwise standard infinitely lived investor with power utility. This is true for two alternative versions of the constraint which make wealth and consumption follow martingales in levels or in logs, respectively. Reaching for…
| John Y. Campbell
September 2019. GrowthPolicy’s Devjani Roy interviewed John Y. Campbell, Morton L. and Carole S. Olshan Professor of Economics at Harvard University, on the current investing environment, asset pricing, stock market lessons from India, and solutions for financial crises. | Read more interviews like this one.
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| John Y. Campbell
Sources of Inaction in Household Finance: Evidence from the Danish Mortgage Market. John Y. Campbell, March 2018, Paper, "A common problem in household finance is that households are often inactive in response to incentives. Mortgages are generally the largest household liability, and mortgage refinancing is an important channel for monetary policy transmission, so inactivity in this setting can be socially costly. We study how the Danish…
| John Y. Campbell
Do the Rich Get Richer in the Stock Market? Evidence from India. John Y. Campbell, March 2018, Paper, "We use data on Indian stock portfolios to show that return heterogeneity is the primary contributor to increasing inequality of wealth held in risky assets by Indian individual investors. Return heterogeneity increases equity wealth inequality through two main channels, both of which are related to the prevalence of undiversified accounts that…
| John Y. Campbell
Restoring Rational Choice: The Challenge of Consumer Financial Regulation. John Y. Campbell, February 2016, Paper. "This lecture considers the case for consumer financial regulation in an environment where many households lack the knowledge to manage their financial affairs effectively. The lecture argues that financial ignorance is pervasive and unsurprising given the complexity of modern financial products, and that it contributes meaningfully…
| John Y. Campbell
International Comparative Household Finance. John Y. Campbell, August 15, 2015, Paper. "This paper reviews the literature on international comparative household finance. The paper presents summary statistics on household balance sheets for 13 developed countries, and uses these statistics to discuss common features and contrasts across countries. The paper then discusses retirement savings, investments in risky assets, unsecured debt, and…
| John Y. Campbell
A Model of Mortgage Default. John Y. Campbell, July 23, 2015, Paper. "In this paper, we solve a dynamic model of households' mortgage decisions incorporating labor income, house price, inflation, and interest rate risk. Using a zero-profit condition for mortgage lenders, we solve for equilibrium mortgage rates given borrower characteristics and optimal decisions. The model quantifies the effects of adjustable versus fixed mortgage rates, loan-to…
| John Y. Campbell
Emerging Trends: Asset Pricing. John Y. Campbell, May 15, 2015, Paper. "The modern field of asset pricing is organized around the concept of the stochastic discount factor. This essay uses this framework to discuss the literature on predictability of asset returns in the short and long run, the influence of irrational investor expectations on asset prices, and the cross-section of stock returns. Future progress will require microeconomic data on…
| John Y. Campbell
The Impact of Regulation on Mortgage Risk: Evidence from India. John Y. Campbell, September 2014, Paper. "We employ loan-level data on over a million loans disbursed in India between 1995 and 2010 to understand how fast-changing regulation impacted mortgage lending and risk. Our paper uses changes in regulatory treatment discontinuities associated with loan size and leverage to detect regulation-induced loan delinquencies. We also find that an…