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Barriers to household risk management: evidence from India
Cole, Shawn; Gine, Xavier; Tobacman, Jeremy; Vickery, James; Townsend, Robert M.; Topalova, Petia (2009-05-01)
Financial engineering offers the potential to significantly reduce the consumption fluctuations faced by individuals, households, and firms. Yet much of this potential remains unfulfilled. This paper studies the adoption of an innovative rainfall insurance product designed to compensate low-income Indian farmers in the event of insufficient rainfall during the primary monsoon season. We first document relatively low adoption of this new risk management product: Only 5-10 percent of households purchase the insurance, even though they overwhelmingly cite rainfall variability as their most ...
Staff Reports , Paper 373

Journal Article
Asset Holdings of Young Households: Trends and Patterns
Thomas, Logan; Merry, Ellen A. (2014)
The authors use multiple waves of the triennial Survey of Consumer Finances (SCF) from 1989 to 2013 to examine the composition of the asset portfolios of young households whose head of household is between 18 and 41 years of age. The focus is on households? decisions to hold different types of assets, including both financial assets (e.g., bank accounts, stocks, and retirement accounts) and nonfinancial assets (e.g., residential real estate, businesses, and automobiles). The authors describe the patterns of acquisition of broad asset categories in the early part of the life cycle with ...
Review , Volume 96 , Issue 4 , Pages 391-411

Working Paper
Out of Sight No More? The Effect of Fee Disclosures on 401(k) Investment Allocations
Sialm, Clemens; Stefanescu, Irina; Kronlund, Mathias; Pool, Veronika K. (2020-09-03)
We examine the effects of a 2012 regulatory reform that mandated fee and performance disclosures for the investment options in 401(k) plans. We show that participants became significantly more attentive to expense ratios and short-term performance after the reform. The disclosure effects are stronger among plans with large average contributions per participant and weaker for plans with many investment options. Additionally, these results are not driven by secular changes in investor behavior or sponsor-initiated changes to the investment menus. Our findings suggest that providing salient fee ...
Finance and Economics Discussion Series , Paper 2020-078

Working Paper
When Uncertainty and Volatility Are Disconnected: Implications for Asset Pricing and Portfolio Performance
Aït-Sahalia, Yacine; Matthys, Felix; Osambela, Emilio; Sircar, Ronnie (2021-09-30)
We analyze an environment where the uncertainty in the equity market return and its volatility are both stochastic and may be potentially disconnected. We solve a representative investor's optimal asset allocation and derive the resulting conditional equity premium and risk-free rate in equilibrium. Our empirical analysis shows that the equity premium appears to be earned for facing uncertainty, especially high uncertainty that is disconnected from lower volatility, rather than for facing volatility as traditionally assumed. Incorporating the possibility of a disconnect between volatility and ...
Finance and Economics Discussion Series , Paper 2021-063

Working Paper
Bubbles and Stagnation
Xavier, Inês (2022-05-31)
This paper studies the consequences of asset bubbles for economies that are vulnerable to persistent stagnation. Stagnation is the result of a shortage of assets that creates an oversupply of savings and puts downward pressure on the level of interest rates. Once the zero lower bound on the nominal interest rate binds, the real rate cannot fully adjust downward, forcing output to fall instead. In such context, bubbles are useful as they expand the supply of assets, absorb excess savings and raise the natural interest rate - the real rate that is compatible with full employment - crowding in ...
Finance and Economics Discussion Series , Paper 2022-033

Working Paper
Bayesian Inference and Prediction of a Multiple-Change-Point Panel Model with Nonparametric Priors
Jensen, Mark J.; Fisher, Mark (2018-02-01)
Change point models using hierarchical priors share in the information of each regime when estimating the parameter values of a regime. Because of this sharing, hierarchical priors have been very successful when estimating the parameter values of short-lived regimes and predicting the out-of-sample behavior of the regime parameters. However, the hierarchical priors have been parametric. Their parametric nature leads to global shrinkage that biases the estimates of the parameter coefficient of extraordinary regimes toward the value of the average regime. To overcome this shrinkage, we model ...
FRB Atlanta Working Paper , Paper 2018-2

Working Paper
The Effect of Possible EU Diversification Requirements on the Risk of Banks’ Sovereign Bond Portfolios
Giuzio, Margherita; Paterlini, Sandra; Craig, Ben R. (2019-05-28)
Recent policy discussion includes the introduction of diversification requirements for sovereign bond portfolios of European banks. In this paper, we evaluate the possible effects of these constraints on risk and diversification in the sovereign bond portfolios of the major European banks. First, we capture the dependence structure of European countries? sovereign risks and identify the common factors driving European sovereign CDS spreads by means of an independent component analysis. We then analyze the risk and diversification in the sovereign bond portfolios of the largest European banks ...
Working Papers , Paper 19-12

Working Paper
Funds of Funds' Portfolio Rebalancing during the COVID-19 Crisis
Foley-Fisher, Nathan; Lee, Jeongmin (2025-12-15)
During the COVID-19 crisis, large outflows from bond mutual funds disrupted debt markets. We show that ""funds of funds""-mutual funds that invest in other mutual funds-accounted for a third of those outflows in March 2020. They rebalanced their portfolios mechanically in response to equity market losses, selling bond funds and purchasing equity funds. While they sold 14 percent of their total bond fund holdings, they concentrated sales in government bond funds, liquidating 34 percent of their holdings, over 100 percent of outflows from these funds. Our findings highlight how mechanical ...
Finance and Economics Discussion Series , Paper 2025-106

Working Paper
Who Values Access to College?
Ionescu, Felicia; Vidangos, Ivan; Neelakantan, Urvi; Athreya, Kartik B. (2019-03-07)
A first glance at US data suggests that college -- given its mean returns and sharply subsidized cost for all enrollees -- could be of great value to most. Using an empirically-disciplined human capital model that allows for variation in college readiness, we show otherwise. While the top decile of valuations is indeed large (40 percent of consumption), nearly half of high school completers place zero value on access to college. Subsidies to college currently flow to those already best positioned to succeed and least sensitive to them. Even modestly targeted alternatives may therefore improve ...
Finance and Economics Discussion Series , Paper 2019-015

Working Paper
Dissecting the Great Retirement Boom
See, Kurt; Birinci, Serdar; Faria-e-Castro, Miguel (2024-07)
Between 2020 and 2023, the fraction of retirees in the working-age population in the U.S. increased above its pre-pandemic trend. Several explanations have been proposed to rationalize this gap, such as the rise in net worth due to higher asset returns, the labor market's deterioration due to higher unemployment risk, the expansion of fiscal support programs, and increased mortality risk. We quantitatively study the interaction of these factors and decompose their relative contribution to the recent rise in retirements using an incomplete markets, overlapping generations model with a ...
Working Papers , Paper 2024-017

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