who withdraws housing equity and why the decision to extract home equity is examined using household level data for the uk over 1993 2003 at its peak during the period around 1 in 10 homeowners withdraw equity per year little is known about this financial decision i find that the equity withdrawal decision conforms to predictions from the standard life cycle framework and models that predict its use as a financial buffer the paper also estimates responses to the large house price appreciation and significant reductions in mortgage rates seen during the period

reassessing the gender wage gap in madagascar does labor force attachment really matter abstract in the labor economics literature it has been argued that differences in labor force attachment across gender are important to explain the extent of the gender wage gap however measures of women s work experience are particularly prone to errors given discontinuity in labor market participation using proxy measures such as potential experience may lead to biased estimates of the returns to human capital such biases cannot be ignored since these returns are used in the standard decomposition techniques to measure the extent of gender based wage discrimination by matching two original surveys conducted in madagascar in 1998 a labor force survey and a biographical survey we built a unique data set that enabled us to combine the original information gathered from each of them particularly the earnings from current employment and the entire professional trajectories our results lead to a reassessment of the returns to human capital as potential experience always exceeds actual experience for b

analysts interim earnings forecasts evidence on the forecasting process existing empirical evidence indicates that analyst forecasts of corporate earnings do not meet the strict rationality standards prescribed by econometric tests of the rational expectations hypothesis 1 in this paper we address the question of whether the expectation formation process underlying analyst forecasts is adaptive or whether these forecasts are influenced by noninformational factors such as incentives arising from the market for their forecasts o brien 1988 lin and mcnichols 1993 francis and philbrick 1993 and dugar and nathan 1992 and interaction between judgmental and or statistical forecasting methods bunn and wright 1991 fan 1990 and hoerl and kennard 1970 the rejection of rational expectations gives rise to two views of the forecasting process of analysts the first based on an informational argument is that the forecasting process is adaptive marcet and sargent

understanding differences in household financial wealth between the united states and great britain in this paper we describe the household wealth distribution in the united states and united kingdom over the past two decades and compare both wealth inequality and the form in which wealth is held unconditionally there are large differences in financial wealth between the two countries at the top fifth of the wealth distribution even after controlling for age and income differences between the two countries we show that the median u s household accumulates more financial wealth than their united kingdom counterpart does we explore a number of alternative reasons for these differences and reject some explanations as implausible some of the observed differences are due to what we refer to as initial conditions in particular previously high rates of corporate equity ownership in the u s and housing ownership among young british households this only provides a partial explanation however among other explanations are differences in the annuitization of retirement incomes and in the amount of wealth held in the form of housing equity in the first case forced and voluntary annuitization in the united kingdom mean older households face considerably less longevity risk in the second higher house price volatility in the united kingdom can create an incentive as shown banks blundell and smith 2002 used from stock market equity earlier in the life cycle

the impact of house prices on consumption in the uk a new perspective this paper proposes an alternative approach to the question of how house prices influence household consumption by focusing on their impact on mortgage equity withdrawal and household saving household level data are used to derive a measure of expected and unexpected changes in house prices these are then incorporated into a recursive bivariate probit model of the decision to withdraw housing equity and save the results suggest that households respond to changes in their housing wealth primarily by increasing their mortgage borrowing rather than by decreasing their savings although this is mainly for younger households however while changes in housing wealth do not have a direct impact on household saving they do have an important indirect impact since they increase the likelihood that the household will withdraw equity which in turn has a negative impact on household saving

unemployment risk and precautionary wealth evidence from households balance sheets this paper examines precautionary behavior by relating job loss risk to household net worth we use existing best practice and some new strategies to deal with some problematic issues inherent in this literature regarding proxying uncertainty instrumentation and incorporating theoretical restrictions we do not find precautionary variation in the wealth holdings of households with low permanent income but do find precautionary effects for moderate and higher income households when the dependent variable is total net worth these findings are robust to several alternative specifications but we do not find precautionary responses in subaggregates of wealth that exclude home equity

housing markets consumption and financial liberalisation in the major economies abstract this paper analyses the implications of relaxing credit restrictions in housing finance markets a theoretical model of the interaction of financial and housing markets and forward looking agents is developed the effects of financial liberalisation in the model are analysed and evidence from the u s a and u k on the impact of easing credit restrictions is presented estimates are also made of the degree to which credit restrictions may bind on households in those countries where the range of mortgage products on offer is still more limited than in the u k and u s a simulations are undertaken to gauge the effect on consumption saving and bequests of wealth of possible future convergence in national systems of housing finance

interest rates and equity extraction during the housing boom credit record panel data from 1999 2010 indicates that the likelihood of home equity extraction borrowing on average about 40 000 against one s home peaked in 2003 when mortgage rates reached historic lows we estimate a 27 percent rise in extraction in response to a 100 basis point rate decline and that house price growth amplifies this relationship differential responses to interest rates and home price appreciation by borrower age and credit score provide new evidence of financial frictions finally equity extractions are associated with higher default risk consistent with the use of borrowed funds for consumption or illiquid investment

financial literacy and mortgage equity withdrawals abstract mortgage equity withdrawals mew are correlated with covariates consistent with a permanent income framework augmented for credit constraints we assess linkages between mew and financial literacy education using the health and retirement study hrs and panel study of income dynamics psid we find that the financially literate are 3 5 percentage points less likely to withdraw housing equity via non home equity loan mortgages using the hrs while college graduates are 5 percentage points less likely than those without a high school degree in the psid among those withdrawing housing equity in the psid college graduates extract significantly less equity and are less likely to have high levels of housing leverage after doing so

house price shocks and household indebtedness in the united kingdom we use household panel data to explore the link between changes in house prices and household indebtedness both secured on housing assets and unsecured in the united kingdom we show that households which are borrowing constrained by a lack of housing equity as collateral make greater use of unsecured debt such as credit cards or personal loans in response to rising house prices which relax this constraint such households are more likely to refinance and to increase their indebtedness relative to unconstrained households however for most households house price movements appear to have little impact on indebtedness

home is where the equity is mortgage refinancing and household consumption applying a permanent income model with exogenous liquidity constraints and mortgage behavior household refinancing when mortgage interest rates are historically high and rising a persistent empirical puzzle is explained using data from the panel study of income dynamics households experiencing an unemployment shock and having limited initial liquid assets to draw upon are shown to have been 25 more likely to refinance 1991 94 on average such liquidity constrained households converted over two thirds of every dollar of equity they removed into current consumption as mortgage rates plummeted 1991 94 producing an estimated expenditure stimulus of at least 28 billion

endogenous entry exit as an alternative explanation for the disciplining role of independent analysts abstract gu and xue 2008 the superiority and disciplining role of independent analysts journal of accounting and economics this issue doi 10 1016 j jacceco 2008 02 002 study the disciplining effect of independent analysts on the accuracy and forecast relevance of the forecasts of non independent analysts one of the intriguing results is that while independent analysts issue inferior forecasts their presence appears to reduce the forecast bias improve the forecast accuracy and increase the forecast relevance of forecasts issued by non independent analysts we explore alternative explanations for the gu xue results our evidence of endogenous entry and exit of independent analysts provides a more compelling explanation for the reported results

saving and liquidity constraints this paper is concerned with the theory of saving when consumers are not permitted to borrow and with the ability of such a theory to account for some of the stylized facts of saving behavior the models presented in the paper seem to account for important aspects of reality that are not explained by traditional life cycle models copyright 1991 by the econometric society

the effect of private wealth on the retirement rate an empirical analysis theoretical models predict a positive effect of the level of private wealth on retirement in many countries there is a trend towards the introduction of more individual freedom of choice in pension schemes the level of private wealth will become an increasingly important factor in the retirement decision empirical analysis of retirement behaviour of elderly workers so far has concentrated on properties of the pension system for a sample of elderly male workers in the netherlands we empirically analyse the effect of wealth on the retirement rate we find evidence for a positive effect of wealth on early retirement the author economica 2010 the london school of economics and political science

expectations heterogeneous forecast errors and consumption micro evidence from the michigan consumer sentiment surveys the household data underlying the michigan index of consumer sentiment are used to test the rationality of consumer expectations and their usefulness in forecasting expenditure the results can be interpreted as characterizing the shocks that hit different types of households over time expectations are found to be biased and inefficient at least ex post people underestimated the disinflation of the early 1980s and the severity of recent business cycles people s forecast errors are also systematically correlated with their demographic characteristics in part because of time varying group level shocks further sentiment helps forecast consumption growth some of this rejection of the permanent income hypothesis is due to the systematic demographic components in forecast errors

house prices borrowing constraints and monetary policy in the business cycle i develop a general equilibrium model with sticky prices credit constraints nominal loans and asset prices changes in asset prices modify agents borrowing capacity through collateral value changes in nominal prices affect real repayments through debt deflation monetary policy shocks move asset and nominal prices in the same direction and are amplified and propagated over time the financial accelerator is not constant across shocks nominal debt stabilises supply shocks making the economy less volatile when the central bank controls the interest rate i discuss the role of equity debt indexation and household and firm leverage in the propagation mechanism finally i find that monetary policy should not target asset prices as a means of reducing output and inflation volatility

first time house buying and catch up a cohort study 2015 the london school of economics and political science we investigate whether different ages of first time house buying lead to persistent differences in homeownership between cohorts our data span nearly 40 years and multiple cycles of england s volatile house prices ownership rates at thirty have differed substantially with a significant negative association with prices the persistence of differences is assessed using synthetic cohort techniques two methods of dealing with measurement error problems both indicate that cohorts with low ownership rates at thirty catch up almost all of the ownership gap by forty earlier access to homeownership may result in the ownership of slightly larger homes at around forty

gaap versus the street an empirical assessment of two alternative definitions of earnings managers security analysts investors and the press rely increasingly on modified definitions of gaap net income known by such names as operating and pro forma earnings we document this phenomenon and discuss competing explanations for the recent rise in the use of such modified earnings numbers and implications for the interpretation of related accounting research our results show that over the past 20 years there has been a dramatic increase in the frequency and magnitude of cases where gaap and street earnings differ further there is a very strong bias toward the reporting of a street earnings number that exceeds the gaap earnings number we also show that the market response to the street earnings number has displaced gaap earnings as a primary determinant of stock prices finally through an analysis of earnings releases we show that management has taken a proactive role in defining and emphasizing the street number when communicating to analysts and investors

the behavioral life cycle hypothesis self control mental accounting and framing are incorporated in a behavioral enrichment of the life cycle theory of saving called the behavioral life cycle blc hypothesis the key assumption of the blc theory is that households treat components of their wealth as nonfungible even in the absence of credit rationing specifically wealth is assumed to be divided into three mental accounts current income current assets and future income the temptation to spend is assumed to be greatest for current income and least for future income considerable empirical support for the blc theory is presented primarily drawn from published econometric studies

aging in place housing maintenance and reverse mortgages we study the role of housing wealth in financing retirement consumption in our model retirees 1 derive utility benefits from remaining in their home aging in place and 2 choose in each period whether to maintain their house the evidence that we present shows that these features are important in explaining the saving decisions of the elderly the costs and the maintenance requirement of reverse mortgages rms reduce or eliminate the benefits of the loans for retirees who wish to do less maintenance we evaluate the impact of different loan features on retirees utility cash flows to lenders and to the government agency that provides mortgage insurance we show that combining rms with insurance against a forced home sale e g due to a move to a nursing home is pareto improving and can lead to increased demand for the loans due to product complementarities

baby boomer retirement security the roles of planning financial literacy and housing wealth abstract we compare wealth holdings across two cohorts of the health and retirement study the early baby boomers in 2004 and individuals in the same age group in 1992 levels and patterns of total net worth have changed relatively little over time though boomers rely more on housing equity than their predecessors most important planners in both cohorts arrive close to retirement with much higher wealth levels and display higher financial literacy than non planners instrumental variables estimates show that planning behavior can explain the differences in savings and why some people arrive close to retirement with very little or no wealth

earnings inequality and the intersectionality of gender and ethnicity in sub saharan africa the case of tanzanian manufacturing nordman robilliard and roubaud 2011 conclude that there is a broad consensus regard ing the magnitude and explanation of earnings differentials based on ethnicity and gender in sub saharan africa across the small but grow ing literature however to date none have consid ered the intersectionality of gender and ethnicity as a source of earnings inequality in sub saharan africa as far as we can determine

excess sensitivity and asymmetries in consumption an empirical investigation most empirical studies on liquidity constraints classify a consumer as being constrained on the basis of a single indicator such as the asset to income ratio in this analysis the authors model the probability that a consumer faces liquidity constraints as a function of multiple social and economic factors this probability function is estimated simultaneously with the degree of excess sensitivity of consumption to income in a switching regressions framework the switching regressions apply optimal weights to the densities for the euler equations in the two states and are less susceptible to sample misclassification our results based on data from the cex confirm that liquidity constrained consumers are excessively sensitive to variables already known to economic agents however there is also evidence that the unconstrained consumers exhibit behavior that is inconsistent with the theoretical predictions further analysis suggests that such behavior could be explained by time non separable preferences copyright 1997 by ohio state university press

incentives information and efficiency in the uk mortgage market this paper analyses the choices made by households in the uk about mortgages it considers whether there might be forms of market failure that prevent the structure of mortgage debt better reflecting the underlying preferences of households uk households lie at one end of a spectrum of the degree of uncertainty over the nominal payments due on mortgage debt there are several different hypotheses for the type of mortgages households choose some are consistent with an efficient market others not the paper looks at alternative explanations for the behaviour of uk households and assesses which are consistent with the evidence when comparing the uk mortgage market with those of other developed economies two striking facts stand out first the stock of mortgage debt in the uk is large both absolutely and relative to the size of the economy second an unusually high proportion of that mortgage debt is at interest rates that are either variable or will shortly become variable figure 1 shows that at the end of 2002 the stock of mortgage debt in the uk was close to 70 of gdp at that time only denmark and the netherlands amongst developed economies had a larger stock of mortgage debt relative to gdp by the middle of 2004 the uk had overtaken denmark figure 2 shows that at the end of 2003 around 75 of the stock of mortgage debt was at variable interest rates although 25 of the stock was at fixed rate the overwhelming proportion of fixed rate mortgages have the interest rate set only for a few years figure 3 which focuses on the flow of new mortgage lending shows that although there have been times in recent years when 30 40 of the flow of new mortgage lending has been at a fixed rate no more than 4 of new mortgages have had the rate set for more than five years figure 4 shows that the uk is at one end of a spectrum in terms of the degree to which interest rates on mortgages are variable all of this means that the uk household sector faces a degree of uncertainty about the nominal profile of mortgage payments which is significantly greater than in almost any other country none of these observations in themselves show that there are failures in the structure of the uk mortgage market but they do prompt a series of fundamental economic questions why is it that uk households seem far more willing to take on uncertainty about the profile of repayments on mortgages than in other countries what might the contribution of the dominance of variable rate mortgages have been to the unusually though not uniquely high degree of variability in house prices in the uk are uk households taking account of the risk and return characteristics of various types of mortgage contracts in making choices what are the incentives of lenders and financial advisers in the uk mortgage market are there problems in the capital markets that prevent the

biased forecasts or biased earnings the role of reported earnings in explaining apparent bias and over underreaction in analysts earnings forecasts the extensive literature that investigates whether analysts earnings forecasts are biased and or inefficient has produced conflicting evidence and no definitive answers to either question this paper shows how two relatively small but statistically influential asymmetries in the tail and the middle of distributions of analysts forecast errors can exaggerate or obscure evidence consistent with analyst bias and inefficiency leading to inconsistent inferences we identify an empirical link between firms recognition of unexpected accruals and the presence of the two asymmetries in distributions of forecast errors that suggests that firm reporting choices play an important role in determining analysts forecast errors r 2003 elsevier b v all rights reserved

the relevance of standard estimates of rates of return to schooling for education policy a critical assessment abstract this paper examines the accuracy and usefulness of estimated rates of return to schooling based on the standard human capital model of becker and mincer regarding accuracy it investigates whether failure to account for differences in ability and school quality lead to significant biases estimates using ghanaian data confirm this possibility even when accurate estimated rates of return to additional years of schooling may have limited policy implications more useful for governments are rates of return to investments in school quality the paper uses data on cognitive skills to estimate rates of return to three types of school quality improvements

determinants of the informativeness of analyst research abstract we examine cross sectional determinants of the informativeness of analyst research i e their effect on security prices controlling for endogeneity among the factors affecting informativeness analyst reports are more informative when the potential brokerage profits are higher e g high trading volume high volatility and high institutional ownership and lower when information processing costs e g more business segments are high we also find that the informativeness of analyst research and informativeness of financial statements are complements

the social and private micro level consequences of homeownership abstract this paper reviews the literature that describes the micro level economic and social consequences of homeownership we adopt an interdisciplinary approach and include studies from economics sociology geography political science psychology and other disciplines our focus is on the set of consequences of homeownership in developed countries our list of potential outcomes of homeownership includes the impact on household wealth and portfolio choice mobility labor force participation urban structure and segregation home maintenance political and social activities health demographics self esteem and child outcomes there is substantial evidence that homeownership has important effects on some household behaviors and outcomes however we find that much of the past 30 year s literature on consequences of homeowning is deficient from a theoretical or econometric perspective we suggest solutions and identify research gaps present in the literature

aging and the income value of housing wealth abstract the potential of reverse annuity mortgages to increase the current income of the elderly is analyzed we conclude that most low income elderly also have little housing equity in general a reverse annuity mortgage would substantially affect the income only of the single elderly who are very old whose life expectancy is short on the other hand if the transfer were in the form of a lump sum payment rather than an annuity the payment would increase the liquid wealth of most elderly families by a large fraction thus legislation that would facilitate the market for reverse mortgages could improve substantially the financial status of a small proportion of the elderly

the superiority and disciplining role of independent analysts abstract we show that although forecasts of independent analysts are less accurate ex post they yield forecast errors that are more strongly associated with abnormal stock returns this suggests that forecasts of independent analysts are superior to those of nonindependent analysts in representing ex ante market expectations we also show that forecasts of nonindependent analysts become more accurate and less biased and produce forecast errors more strongly associated with abnormal stock returns when independent analysts are following the same firms than when they are not this suggests that the presence of independent analysts disciplines the behavior of nonindependent analysts

conflict of interest and the credibility of underwriter analyst recommendations brokerage analysts frequently comment on and sometimes recommend companies that their firms have recently taken public we show that stocks that underwriter analysts recommend perform more poorly than buy recommendations by unaffiliated brokers prior to at the time of and subsequent to the recommendation date we conclude that the recommendations by underwriter analysts show significant evidence of bias we show also that the market does not recognize the full extent of this bias the results suggest a potential conflict of interest inherent in the different functions that investment bankers perform

rationality and analysts forecast bias this paper proposes and tests a quadratic loos utility function for modeling corporate earnings forecasting where financial analysts trade off bias to improve management access and forecast accuracy optimal forecasts with minimum expected error are optimistically biased and exhibit predictable cross sectional variation related to analyst and company characteristics empirical evidence from individual analyst forecasts is consistent with the model s predictions these results suggest that positive and predictable bias may be a rational property of optimal earnings forecasts prior studies using classical notions of unbiasedness may have prematurely dismissed analysts forecasts as being irrational or inaccurate

housing related well being in older people the impact of environmental and financial influences with the ageing of populations in europe one can expect new pressures on the existing housing stock to accommodate those older individuals with mobility problems at the same time housing assets are expected to be called upon to guarantee financial security for older homeowners the accessibility and suitability of housing and the financial security that housing provides may exert an independent influence on well being to what extent either factor prevails in influencing well being has important policy implications this paper empirically examines the impact of investment and environmental housing influences on satisfaction with housing in a population of older people data are used from the european country which had the greatest number of homeowners at the time of the survey spain and where at the same time older people rely heavily on informal caregiving robust evidence is presented to suggest that satisfaction with housing in old age is indeed independently associated with environmental influ

labour supply as a buffer evidence from uk households this paper examines how individuals use their labour supply hours of work and participation decisions as a margin of adjustment or buffer in response to financial shocks the financial shock measure is constructed using individuals expected change to their financial situation in the year ahead relative to the perceived outcome one year later using bhps data we find that both men and women adjust their labour supply in response to financial shocks the propensity to participate in the labour market also appears to respond to the experience of a financial shock but is less robust

financial analysts forecasts of earnings a better surrogate for market expectations abstract the specification of the market expectation of accounting numbers is a common feature of many empirical studies in accounting and finance givoly and lakonishok 1979 found that financial analysts forecasts have information content this study evaluates the quality of analysts forecasts as surrogates for the market expectation of earnings and compares it with that of prediction models commonly used in research results indicate that prediction errors of analysts are more closely associated with security price movements suggesting that analysts forecasts provide a better surrogate for market expectations than forecasts generated by time series models the study also identifies factors that might contribute to the performance of the financial analysts forecasts the broadness of the information set employed by analysts and to a lesser extent their reliance on information released after the end of the fiscal year appear to be important contributors to their performance

motivations for equity borrowing a welfare switching effect during the early 2000s mortgage market innovation together with home price appreciation increased the scope for mortgage equity withdrawal from a macroeconomic perspective this proved to be an important transmission mechanism for the wealth particularly collateral effects of housing microeconomic accounts of equity borrowing are less well developed since standard models of savings and consumption rarely take housing wealth into account this paper however builds on a small but growing literature assigning a precautionary savings role to consumption from housing wealth the analysis uses panel data sourced from britain and australia to model households motivations for equity borrowing key among these motivations are pressing uninsurable ostensibly short term spending needs in these contexts it is proposed that equity borrowing assumes a welfare switching role substituting privately owned housing wealth for collectively funded safety nets

house price shocks negative equity and household consumption in the united kingdom we examine the impact of unanticipated housing capital gains on consumption behavior using data from the british household panel survey and county level house price data we condition the models on household financial expectations and on household real financial capital gains imputed from the family resources survey we find a marginal propensity to consume out of unanticipated shocks to housing wealth of 0 01 omitting the measure of financial expectations biases the results upward we find little evidence of heterogeneity in responses of young and old homeowners but differences between owners and renters we also find asymmetric behavior between house price rises and falls and a disproportionate impact on saving if the household had negative housing equity at the start of the period jel d91 e21 r31 c 2010 by the european economic association

debt and depression causal links and social norm effects individuals exhibiting problems repaying their debt obligations also exhibit much worse psychological health selection into problem debt on the basis of poor psychological health accounts for much of this difference the causality between problem debt and psychological health may be two way using individual level uk panel data local house price movements exogenous to individual households are used to establish the causality from problem mortgage debt to psychological health in addition the social norm effects of problem debt are investigated using local bankruptcy and repossession rates results indicate there are sizeable causal links and social norm effects in the debt psychological health relationship language en