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A Critique of the Literature on the US Financial Debt Crisis
Stein, Jerome L. - CESifo - 2010
A healthy financial system encourages the efficient allocation of capital and risk. The collapse of the house price bubble led to the financial crisis that started in 2007. There is a large empirical literature concerning the relation between asset price bubbles and financial crises. I evaluate...
Persistent link: https://www.econbiz.de/10008534053
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Application of Stochastic Optimal Control to Financial Market Debt Crises
Stein, Jerome L. - CESifo - 2009
This interdisciplinary paper explains how mathematical techniques of stochastic optimal control can be applied to the recent subprime mortgage crisis. Why did the financial markets fail to anticipate the recent debt crisis, despite the large literature in mathematical finance concerning optimal...
Persistent link: https://www.econbiz.de/10005094473
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A call on Art investments
Kraeussl, Roman; Wiehenkamp, Christian - Center for Financial Studies - 2010
The art market has seen boom and bust during the last years and, despite the downturn, has received more attention from investors given the low interest environment following the financial crisis. However, participation has been reserved for a few investors and the hedging of exposures remains...
Persistent link: https://www.econbiz.de/10010958656
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Discounting in an Uncertain World - Disentangling the Debate on the Weitzman-Gollier Puzzle
Buchholz, Wolfgang - CESifo - 2014
Under conditions of risk it makes a difference whether the discount rate is determined as an expected present or as an expected future value. This difference which is dubbed as the Weitzman-Gollier puzzle has stimulated an intensive discussion which, however, is somewhat confusing. In this paper...
Persistent link: https://www.econbiz.de/10010948878
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Are risk preferences dynamic? Within-subject variation in risk-taking as a function of background music
Halko, Marja Liisa; Kaustia, Markku - Center for Financial Studies - 2012
This paper investigates whether preference interactions can explain why risk preferences change over time and across contexts. We conduct an experiment in which subjects accept or reject gambles involving real money gains and losses. We introduce within-subject variation by alternating...
Persistent link: https://www.econbiz.de/10010958502
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Saving rates and portfolio choice with subsistence consumption
Achury, Carolina; Hubar, Sylwia; Koulovatianos, Christos - Center for Financial Studies - 2011
We analytically show that a common across rich/poor individuals Stone-Geary utility function with subsistence consumption in the context of a simple two-asset portfolio-choice model is capable of qualitatively and quantitatively explaining: (i) the higher saving rates of the rich, (ii) the...
Persistent link: https://www.econbiz.de/10010958742
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Risk-Taking-Neutral Background Risk
Franke, Guenter; Schlesinger, Harris; Stapleton, Richard C. - CESifo - 2013
decision made with and without some exogenous background risk, it is often easier to compare the decision made to one made with …
Persistent link: https://www.econbiz.de/10010877707
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Risk aversion under preference uncertainty
Kräussl, Roman; Lucas, André; Siegmann, Arjen - Center for Financial Studies - 2010
We show that if an agent is uncertain about the precise form of his utility function, his actual relative risk aversion may depend on wealth even if he knows his utility function lies in the class of constant relative risk aversion (CRRA) utility functions. We illustrate the consequences of this...
Persistent link: https://www.econbiz.de/10010986389
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Fitting parsimonious household- portfolio models to data
Hubar, Sylwia; Koulovatianos, Christos; Li, Jian - Center for Financial Studies - 2014
US data and new stockholding data from fifteen European countries and China exhibit a common pattern: stockholding shares increase in household income and wealth. Yet, there is a multitude of numbers to match through models. Using a single utility function across households (parsimony), we...
Persistent link: https://www.econbiz.de/10010986432
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Optimal choice and beliefs with ex ante savoring and ex post disappointment
Gollier, Christian; Muermann, Alexander - Center for Financial Studies - 2006
We propose a new decision criterion under risk in which people extract both utility from anticipatory feelings ex ante … and disutility from disappointment ex post. The decision maker chooses his degree of optimism, given that more optimism … the decision maker takes on less risk compared to an expected utility maximizer. This speaks to the equity premium puzzle …
Persistent link: https://www.econbiz.de/10010986494