Household Finance

The study of household finance is challenging because household behavior is difficult to measure, and households face constraints not captured by textbook models. Evidence on participation, diversification, and mortgage refinancing suggests that many households invest effectively, but a minority mak...

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Bibliographic Details
Published in:The Journal of finance (New York) 2006-08, Vol.61 (4), p.1553-1604
Main Author: CAMPBELL, JOHN Y.
Format: Article
Language:English
Subjects:
Asset allocation
Borrowing
Economic behaviour
Empirical tests
Finance
Financial economics
Financial investments
Financial portfolios
Financial services
Household economics
Households
Investment policy
Investment risk
Investors
Mortgage loans
Mortgage rates
Mortgages
Personal finance
Risk aversion
Studies
U.S.A
Wealth
Working papers
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Summary:The study of household finance is challenging because household behavior is difficult to measure, and households face constraints not captured by textbook models. Evidence on participation, diversification, and mortgage refinancing suggests that many households invest effectively, but a minority make significant mistakes. This minority appears to be poorer and less well educated than the majority of more successful investors. There is some evidence that households understand their own limitations and avoid financial strategies for which they feel unqualified. Some financial products involve a cross-subsidy from naive to sophisticated households, and this can inhibit welfare-improving financial innovation.
ISSN:0022-1082
1540-6261
DOI:10.1111/j.1540-6261.2006.00883.x