Thesis (M.S.)--University of Wisconsin--Madison, 1983. / Typescript. eContent provider-neutral record in process. Description based on print version record. Includes bibliographical references.

Thesis (Ph. D.)--Ohio State University, 2004. / Title from first page of PDF file. Document formatted into pages; contains x, 97 p. : ill. Advisor: Lucia Dunn, Department of Economics. Includes bibliographical references (p. 94-97).

The existing literature on household wealth accumulation has hitherto recognized the lifecycle effects, household socio-economic characteristics, bequest motives, and intergenerational transfers as important factors affecting household net wealth. The two empirical essays in this thesis expand the literature by emphasizing the likely roles that a household's tenure choice and home equity borrowing decisions have in its wealth accumulation process. The first essay, entitled "Homeownership and Household Wealth Accumulation", tests whether homeownership has placed the owner household on a more favorable wealth accumulation path, based on past observations that the values of owner-occupied housing have grown at a real rate greater than those of financial or other tangible assets. The premise is that, while the tenure choice decision is affected by a household's net wealth, the housing tenure chosen could place a household on different wealth accumulation paths over its life-cycle. Controlling for selection bias arising from tenure status, the results indicate that typical homeowners and renters have distinct wealth accumulation processes. While homeownership improves the wealth position of homeowners, the renter households are, however, better off in their existing tenure than otherwise. It appears that households self-select themselves into the appropriate tenure that optimizes their wealth accumulation paths. The second essay on "Household Consumption/Investment Behavior and Home Equity Loans" investigates which behavioral model underpins the homeowners' consumption and investment decisions of home equity loan funds, and how these decisions impact portfolio decisions and wealth accumulation. It concludes that the 'life-cycle model' and the 'precautionary savings model' prevail over the 'bequest motive model' in motivating the household consumption/investment decisions of home equity loans. Home equity loans alter the illiquid nature of housing investment through convenient tapping of housing equity, and reduce household preference to hold liquid assets to meet precautionary needs. Their presence encourages loan users to hold smaller shares of liquid cash and financial assets in total assets, and to diversify from housing asset to business, real estate and illiquid nonhousing assets. They generally reduce homeowners' net wealth, reflecting a tendency for borrowed funds to be consumed or invested in loss-incurring assets.

The existing literature on household wealth accumulation has hitherto recognized the lifecycle effects, household socio-economic characteristics, bequest motives, and intergenerational transfers as important factors affecting household net wealth. The two empirical essays in this thesis expand the literature by emphasizing the likely roles that a household's tenure choice and home equity borrowing decisions have in its wealth accumulation process. The first essay, entitled "Homeownership and Household Wealth Accumulation", tests whether homeownership has placed the owner household on a more favorable wealth accumulation path, based on past observations that the values of owner-occupied housing have grown at a real rate greater than those of financial or other tangible assets. The premise is that, while the tenure choice decision is affected by a household's net wealth, the housing tenure chosen could place a household on different wealth accumulation paths over its life-cycle. Controlling for selection bias arising from tenure status, the results indicate that typical homeowners and renters have distinct wealth accumulation processes. While homeownership improves the wealth position of homeowners, the renter households are, however, better off in their existing tenure than otherwise. It appears that households self-select themselves into the appropriate tenure that optimizes their wealth accumulation paths. The second essay on "Household Consumption/Investment Behavior and Home Equity Loans" investigates which behavioral model underpins the homeowners' consumption and investment decisions of home equity loan funds, and how these decisions impact portfolio decisions and wealth accumulation. It concludes that the 'life-cycle model' and the 'precautionary savings model' prevail over the 'bequest motive model' in motivating the household consumption/investment decisions of home equity loans. Home equity loans alter the illiquid nature of housing investment through convenient tapping of housing equity, and reduce household preference to hold liquid assets to meet precautionary needs. Their presence encourages loan users to hold smaller shares of liquid cash and financial assets in total assets, and to diversify from housing asset to business, real estate and illiquid nonhousing assets. They generally reduce homeowners' net wealth, reflecting a tendency for borrowed funds to be consumed or invested in loss-incurring assets. / Business, Sauder School of / Graduate

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Thesis advisor: Christopher Baum / Thesis advisor: Fabio Ghironi / Do events in the natural gas market cause repercussions in the crude oil market? In light of the enormous impact that price movements in the two largest U.S. energy markets have on the economy, it is important to understand not just the individual markets but also how they relate to one another. On this front, the literature presents a puzzle: while economic theory suggests that the oil and gas markets are interlinked through a bi-directional causal relationship, empirical research has concluded that the oil market affects the gas market but not vice versa. The first chapter of this dissertation improves on the previous studies in two ways: by using high-frequency, intraday oil and gas futures prices and by analyzing the effect of specific news announcements from the weekly oil and gas inventory reports. The results dispel the notion of one-way causality and provide support for the theory. The reaction of the futures volatility and returns is asymmetric, although this asymmetry does not follow the "good news" vs. "bad news" pattern from stock and bond markets; the response depends on whether the shock is driven by oil or gas inventory gluts or shortages. The two-way causality holds not only for the nearby futures contract but also for contracts of longer maturities. These findings underscore the importance of analyzing financial markets in a multi-market context. The second chapter of this dissertation asks whether volatility and trading volume evolve in a unidirectional or bidirectional, contemporaneous or lagged relationship in the crude oil and natural gas futures markets. This question is important because it affects trading and government regulation but previous studies have come to conflicting conclusions. Their main shortcoming is the low frequency of data used in the analysis. This chapter improves on the previous studies in three ways: by using high-frequency, intraday oil and gas futures prices and volume, by including trading not only during the day but also during the night, and by analyzing not only the nearby futures contract but also contracts with longer maturities. For the nearby contract, Granger-causality tests show that past values of volume help explain volatility which agrees with the Sequential Information Arrival Hypothesis. Past values of volatility have explanatory power for volume only when absolute return is used as the volatility measure; when the conditional variance from GARCH models is used as the volatility measure, the causality in this direction disappears. These results change when low-frequency daily data is applied. It is also shown that the volatility-volume relationship differs for contracts with longer maturities. These findings are relevant for regulations, such as trader position limits recently adopted by the U.S. Commodity Futures Trade Commission. The third chapter of this dissertation investigates whether the production structure of firms affects international optimal portfolios, risk-sharing, and response of terms of trade (TOT) to shocks. The answer to this question would enhance our understanding of the home equity bias, yet it has not been addressed in the theoretical literature. This chapter studies the question in a two-country dynamic stochastic general equilibrium model with endogenous portfolio allocation. It shows that the optimal portfolio includes more home equity as the production structure changes from exporter-only, i.e., firms operating in their home countries and serving foreign markets by exports, to multi-national-company-extreme (MNC), i.e., firms hiring labor in both countries and producing locally in both countries. This shift occurs because changing the firms' production structure eliminates exposure to technology differences and allows the home household to accomplish the same diversification with less foreign equity. The production structure also has implications for the effect of technology shocks on the TOT. Under the exporter-only setup, a shock to technology causes a standard TOT deterioration, whereas under the MNC-extreme setup, a shock to technology leads to a TOT improvement. By producing testable predictions, this chapter underscores the need to take firms' production structure into account when analyzing international optimal portfolios, risk sharing, and response of the TOT to technology shocks. This is especially important since empirical research has generated conflicting results. / Thesis (PhD) — Boston College, 2012. / Submitted to: Boston College. Graduate School of Arts and Sciences. / Discipline: Economics.

Essay I: Credit Constraint and College Attendance.  This paper shows that housing wealth alleviate credit constraints for potential college attendees by enabling home owners to extract equity from their property and invest it in the education. Using a large US individual-level survey dataset over the 1996-2011 period, I find that one standard deviation increases of housing prices translate into approximately 72,000 more students enrolled in college each year. My results stay significant when I use proxies for aggregate housing demand shocks and for the topological elasticity of housing supply to generate variation in home equity that is assumed to be orthogonal to decision of going to college. Essay II: Income Inequality and Trade. Does trade with unskilled labor-abundant countries reduce the relative wages of U.S. unskilled labor and consequently cause increased income inequality across industries and regions? Empirical studies in the 1990s found only a modest effect. In this paper, I re-consider the question by using the income inequality measures constructed from Current Population Survey (CPS) data and analyzing the effect of rising Chinese import competition between 1993 and 2007 on US local labor markets. I find that areas which are more exposed to China imports competition have larger changes in income inequality. In my main specification, a $1,000 exogenous decadal rise in a MSA's import exposure per worker leads to a 1.5% increase in the logistic Gini. This re-distributive effect is more profound among non-college educated workers in manufacturing sectors.  Essay III: Employee as Creditor: Evidence from Defined Pension Plans. In this paper, I show the role of pension plans in shaping the firms' labor market decision. By employing the loan covenants violation and consequently transferring of control rights to creditors, I examine the strategic use of pension underfunding by firms and the resultant wage cuts. I also find that the wage concession is less severe for firms from industry with bigger bargaining power. This study sheds light on how firms strategically renegotiate labor contracts to extract concessions from labor. The evidence suggests that credit contracts between debt-holders and shareholders have spillover effects on non-financial stakeholders.

The FHA program to insure reverse mortgages has brought additional attention to the use of home equity conversion to increase income to the elderly. Using simulation, this study compares the economic consequences of the FHA reverse mortgage with two alternative conversion vehicles: sale of a remainder interest and sale-leaseback. An FHA insured plan is devised for each vehicle, structured to represent fair substitutes for the FHA mortgage. In addition, the FHA mortgage is adjusted to allow for a 4 percent annual increase in distributions to the homeowner. The viability of each plan for the homeowner, the financial institution and the FHA is investigated using different assumptions for house appreciation, tax rates, and homeowners’ initial ages. For the homeowner, the return of each vehicle is compared with the choice of not employing home equity conversion. The study examines the impact of tax and accounting rules on the selection of alternatives. The study investigates the sensitivity of the FHA model to some of its assumptions. Although none of the vehicles is Pareato optimal, the study shows that neither the sale of a remainder interest nor the sale-leaseback is a viable alternative vehicle to the homeowner. While each of these vehicles is profitable to the financial institution, the profits are not high enough to transfer benefits to the homeowner and still be workable. The effects of tax rate, house appreciation rate, and homeowner's initial age are surprisingly small. As a general rule, none of these factors materially impact the decision of either the homeowner or the financial institution. Tax and accounting rules were found to have minimal impact on the selection of vehicles. The sensitivity analysis indicates that none of the variables studied alone is likely to materially affect the FHA’s profitability. Although none of the vehicles is Pareato optimal, the study shows that neither the sale of a remainder interest nor the sale-leaseback is a viable alternative vehicle to the homeowner. While each of these vehicles is profitable to the financial institution, the profits are not high enough to transfer benefits to the homeowner and still be workable. The effects of tax rate, house appreciation rate, and homeowner's initial age are surprisingly small. As a general rule, none of these factors materially impact the decision of either the homeowner or the financial institution. Tax and accounting rules were found to have minimal impact on the selection of vehicles. The sensitivity analysis indicates that none of the variables studied alone is likely to materially affect the FHA’s profitability.

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The purpose of this research is to understand and describe the causes affecting the financial institutions’ implementation of reverse mortgage in Sweden as well as the consequences of a large scale implementation, shedding some new light upon the issue of reverse mortgages. This was done from a financial institution point of view. As existent literature in this field of research is currently small in extent, especially in a Swedish context where almost no academic literature has been written, it serves as an exploratory research. From a researcher’s point of view it could hopefully give interesting insights on how new financial products are implemented in general, shedding some light on possible difficulties that may arise during these processes. The research was designed using a qualitative research method. In order to investigate the issues presented several individuals were interviewed from different financial institutions offering various kinds of reverse mortgages in Sweden. Interviews were semi-structured and only the six financial institutions that offer reverse mortgage in Sweden were included. The findings made, as well as the interview questions, were divided into several different sections adopted from the theoretical framework so as make the research more comprehensible and stringent. Because the research design is of exploratory nature it evolved over time, as the authors did not know initially what they would find. The findings provided many interesting insights that were not thought of before. Three major themes were found that could help explain the causes affecting the financial institutions’ implementation of reverse mortgage in Sweden as well as the consequences of a large scale implementation. These themes were age, generation, mentality, macro economical factors, and financial institutions offering reverse mortgage.