Inflation Exposure Expectations and Households Portfolio Choice (Job Market Paper)

Abstract: This paper provides empirical evidence on how households’ expectations about their exposure to inflation affect their portfolio decisions, using the DNB Household Survey. Exploiting the quasi-natural experiment of the 2012 VAT increase, I find that heightened expectations about inflation exposure, driven by expected non-indexation of employment pensions, results in an increase in risky asset allocation, particularly in listed shares and equity mutual funds, for higher expected returns rather than inflation hedging. Moreover, the key mechanism at play operates through the information channel. Pension providers are mandated to regularly send Uniform Pension Overview (UPO) letters in a standardized format, elucidating pension benefits and relevant policy changes, such as indexation. My findings suggest evidence of rational inattention, as households respond more significantly to UPO letters that are timely, relevant, and frequent. However, this behavior can be inefficient, as the portfolios of rationally inattentive households tend to deviate further from the mean-variance efficient frontier.

Presentations: SFI Academic Job Market Workshop 2024, Nova PhD Final Countdown 2024, NETSPAR International PensionWorkshop 2023, AFA Poster 2023, Boca Corporate Finance and Governance Conference 2022, Conference Monetary Policy: Heterogeneity, Communication and Subjective Inflation Expectations 2022, JME-SNB-SCG Conference Poster 2022, BARCELONA Ph.D. Workshop on Expectations in Macroeconomics 2022, SFI Research Days 2022, USI Finance Brownbag 2021, USI Economics Brownbag 2021

The Real Effect of Green Mortgage-back Securities (Draft coming soon)

Abstract:  This study examines the demand and interest rate spread of green multifamily mortgages purchased by Fannie Mae through four potential channels: a salience channel triggered by natural disasters, a bank sustainability commitment channel, a selection channel involving properties in poor condition, and a compliance channel related to local legislation. The research finds that properties financed through green mortgages, designed to enhance energy efficiency in multifamily housing, not only benefit from lower loan premiums but also outperform their non-green counterparts. While green mortgages exhibit higher Loan-to-Value ratios, suggesting increased risk, the differences in prepayment rates and delinquency are negligible. Additionally, this paper analyzes the actual environmental impact of Fannie Mae’s green bond initiative.

Presentations:  SFI Research Days 2024

Are Firms Getting Greener With Green Banking? It Depends on Firm Size, with S. Chen (Draft coming soon) 

Abstract:  We study the effects of bank lending on firms’ green transition in Chinese public firms. The empirical setting exploits the regulations on banks’ green credit performance in 2016 as a positive shock to banks’ sustainability commitments. Using a triple difference-in-differences framework, we document that only in the smallfirm subsample, brown firms whose relationship banks are the more committed banks borrow significantly fewer short-term loans than green firms, compared to firms with other relationship banks. We also find that only in the small-firm subsample, brown firms whose relationship banks are the more committed banks make significantly more efforts in green transition than other brown firms. There is no significant result in the large-firm subsample. This heterogeneity is consistent with the higher financing frictions of small firms. Higher friction leads small firms to be more sensitive to the sustainability commitments of their relationship banks than large firms.

Discussions

• 2024 SFI Research Days: Longevity Shocks and Household Portfolios by Braun. [slides]

• 2022 Conference Monetary Policy: Heterogeneity, Communication and Subjective Inflation Expectations: Inflation Expectation and Corporate  Borrowing Decisions: New Causal Evidence by Coibion, Gorodnichenko, and Ropele. [slides]

• 2022 FMA: Household Finance and Life-Cycle Economic Decisions under the Shadow of Cancer by Dániel Kárpáti. [slides]

• 2022 SFI Research Days: Dissecting the Home Bias in Survey Expectations by Bolliger. [slides]

• 2021 NOVA PhD Perfect Pitch:  How do Investors Learn as Data Becomes Bigger? Evidence from a FinTech Platform by Guecioueur [slides]  

• 2021 NOVA PhD Perfect Pitch: Enhancing Detection of Market Manipulation and Illegal Insider Trading with Machine Learning by Maiorov. [slides]