Essays in household finance
Abstract/Contents
- Abstract
- This thesis contributes to two significant recent advances in the field of household finance. The increased access to large datasets that has expanded researchers ability to test household behavior at the micro-level and the greater recognition of deviations of household behavior from the benchmark household decision making framework. The first chapter introduces the literature and ties in the two main works of this thesis. The second chapter studies the household consumption-savings problem in the context of unexpected automobile expenses. By making use of high-frequency household transaction level banking data, I document the size and frequency of large out-of-pocket automobile expenses. I estimate the consumption-smoothing costs to households and show that households that I identify as low in liquid wealth struggle to finance these expenses directly. Furthermore, I suggest that the observed consumption-smoothing response to automobile expense shocks is unlikely to be generated by the standard benchmark consumption-smoothing model without several augmentations. In particular, low liquid wealth households undersave relative to levels of risk aversion and discount rates typically assumed in the literature. As a result, low liquid wealth households fail to self-insure against an important category of household expense shocks. The third chapter introduces a framework for behavioral household decision making and demonstrates the equilibrium impacts on prices, as well as important distributional state variables such as wealth. We offer a computational and behavioral framework that studies the impact of limited household ability to predict equilibrium prices. We primarily focus on the ability of households to reconcile a long run stationary forecast of prices with the ability to forecast equilibrium prices over a short run finite horizon that is conditional on future aggregate histories (we call this foresight). We are able to offer a degree of computational tractability because of the nature of household optimization that requires only a finite horizon knowledge of equilibrium prices. In particular, we note that the degree of foresight on equilibrium prices can vastly change prices in equilibrium, especially when the degree of foresight is limited to a few periods.
Description
| Type of resource | text |
|---|---|
| Form | electronic resource; remote; computer; online resource |
| Extent | 1 online resource. |
| Place | California |
| Place | [Stanford, California] |
| Publisher | [Stanford University] |
| Copyright date | 2022; ©2022 |
| Publication date | 2022; 2022 |
| Issuance | monographic |
| Language | English |
Creators/Contributors
| Author | Islah, Bilal |
|---|---|
| Degree supervisor | Lustig, Hanno |
| Thesis advisor | Lustig, Hanno |
| Thesis advisor | Bernstein, Shai |
| Thesis advisor | Buchak, Gregory |
| Degree committee member | Bernstein, Shai |
| Degree committee member | Buchak, Gregory |
| Associated with | Stanford University, Graduate School of Business |
Subjects
| Genre | Theses |
|---|---|
| Genre | Text |
Bibliographic information
| Statement of responsibility | Bilal Islah. |
|---|---|
| Note | Submitted to the Graduate School of Business. |
| Thesis | Thesis Ph.D. Stanford University 2022. |
| Location | https://purl.stanford.edu/vd503ps9636 |
Access conditions
- Copyright
- © 2022 by Bilal Islah
- License
- This work is licensed under a Creative Commons Attribution Non Commercial 3.0 Unported license (CC BY-NC).
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