Interest-Only Mortgages and Consumption Growth: Evidence from a Mortgage Market Reform
Conditionally accepted at the International Economic Review
with Natalia Khorunzhina
Participation and Losses in Multi-Level Marketing: Evidence from an FTC Settlement [SSRN link]
Financial Planning Review (2022), volume 5, Issue 1, March 2022
with Tobin Hanspal
The Impact of Interest-Only Loans on Affordability [SSRN Link]
Regional Science and Urban Economics (2020), volume 80, January 2020
with Chandler Lutz
Mortgage Design, Repayment Schedules, and Household Borrowing (Presentation)
Reject and resubmit at the Review of Financial Studies, with Peter van Santen and Patrick Moran
We study how debt repayment schedules affect household borrowing. We exploit a Swedish policy reform that eliminated interest-only mortgages for loan-to-value ratios above 50\%. We document substantial bunching at the threshold, leading to a 5\% reduction in borrowing. Wealthy, unconstrained borrowers drive the results, challenging liquidity constraints as the main explanation. A standard life-cycle model and a model with fixed one-time cost of amortizing fail to match key empirical results. We instead find support for an ongoing flow disutility to amortization. Our results suggest that interest-only mortgages products may increase household borrowing and the lifetime cost of debt.
Mortgage Innovations and House Price Booms
Revise and resubmit at the Journal of Urban Economics, with Chandler Lutz
We study how mortgage product innovation can cause a housing boom even with a robust regulatory mortgage lending framework and strictly enforced recourse borrowing. We show that the introduction of IO mortgages in Denmark in 2003 ignited a housing boom and caused house prices to increase by 36 percent. In line with IO loans lowering debt-service payments and relaxing payment-to-income constraints, results show higher IO loan uptake and house price growth in areas with greater ex-ante benefits of such mortgages. Overall, our results are relevant for the many countries with elevated IO mortgage use and a robust regulatory framework.
Personal Recommendations and Portfolio Quality
with Olga Balakina, Tobin Hanspal, Andreas Hackethal and Dominique Lammer
Social interactions in finance can lead to better financial outcomes or help propagate financial mistakes. We develop a framework that incorporates two views of social interactions in finance and provide empirical evidence of their relevance in a setting where individuals are personally connected. Providing and accepting advice is positively related to portfolio quality but is not driven by high returns. Funds are more likely to be recommended than lottery or attention stocks, leading to increases in portfolio quality. Our evidence suggests that social networks can provide good advice in settings where individuals are personally connected.
Beyond Connectivity: Stock Market Participation in a Network (submitted)
with Olga Balakina and Anastasiia Parakhoniak
The past twenty years have seen an explosion in our ability to share financial information on social networks, yet stock market participation has barely changed. We introduce an equilibrium model of stock market participation with a social network to show that the effect of connectivity on stock market participation depends on how efficient information spreads, which is linked to how agents are connected, homophily and inequality. High-income agents benefit more from connectivity, leading to increased inequality. We discuss the implications for access to financial information, wealth inequality, and stock market participation.
Housing returns across the wealth distribution
with Natalia Khorunzhina and Walter D'Lima
Mortgage market design and wealth inequality: Evidence from interest-only mortgages in Denmark
with Danial Ali Akbari, Natalia Khorunzhina and Timo Trimborn
Can Credit Supply Shocks Affect the Entire Income Distribution?
with Natalia Khorunzhina
Home equity extractions, renovations and house prices
with Natalia Khorunzhina and Walter D'Lima
Macroprudential policies do not affect homeownership rates
with Timo Trimborn
How Fat are the Fingers? Investor Mistakes and Market Efficiency
with Olga Balakina, Arze Karam and Anastasiia Parakhoniak
Demand and supply-side effect of information disclosure: evidence from closet index funds
with Vimal Balasubramaniam, Olga Balakina and Ondrej Honzik
Håndsrækning til førstegangskøbere kan øge kløfterne på boligmarkedet - Finans.dk (2022) with Michael Svarer
De afdragsfrie lån skabte en boligfest, men ikke for unge - Politiken (2021)
Finansinspektionen måste gå längre och avskaffa amorteringskravet! - Ekonomistas (2020)
Hur påverkar amorteringskravet hushållen? Lärdomar från Danmark. Ekonomisk debatt (The Journal of the Swedish Economic Association), 2019:2, 22-32.
Forskare: Argumenten är förlegade - Sydsvenskan (2017), with Tommy Andersson and Petter Lundborg