@arpitrage's Threads
JMP in print at the Journal of Finance!
*takes deep breath*
Let me tell you about my job market paper
*takes deep breath*
Let me tell you about my job market paper
We think about the financial crisis as a sequence of "runs." There was a run on Northern Rock, and in wholesale markets like repo.
But there was also a run by the *bank * on the borrower in the adjustable-rate mortgage market.
Wait, how can a bank run on the borrower?
But there was also a run by the *bank * on the borrower in the adjustable-rate mortgage market.
Wait, how can a bank run on the borrower?
First, some background on these contracts.
Pre-crisis, borrowers would commonly get adjustable-rate mortgage (ARM) contracts which had fixed initial periods of 2, 3, or 5 years; after which they "reset" so payments are benchmarked against the floating market rate.
Pre-crisis, borrowers would commonly get adjustable-rate mortgage (ARM) contracts which had fixed initial periods of 2, 3, or 5 years; after which they "reset" so payments are benchmarked against the floating market rate.
While the attention is on Fannie and Freddie, Ginnie Mae has slowly become a place for risky lending:
- is now larger than Fannie
- basically all loans with 3% down
- debt-to-income rising; typical loan is at or above the "cap" of 43
- credit scores pretty low
- is now larger than Fannie
- basically all loans with 3% down
- debt-to-income rising; typical loan is at or above the "cap" of 43
- credit scores pretty low
Most of these loans are originated by "nonbanks" that specialize in lending-to-securitize
Though credit scores are up (and who knows if these things *mean* the same thing in different years); mortgage leverage is about the same or higher as it was pre-crisis. Typical borrower puts 5% down, makes mortgage payments that are 40% of income.
Live tweeting the Stern Household Finance conference!
Thanks to @stroebel_econ and Theresa Kuchler for organizing
Thanks to @stroebel_econ and Theresa Kuchler for organizing
First up @Kutbil_Ik with Janice Eberly and Gene Amromin on a somewhat informatively titled paper: "Who Pays for College? The Effect of Liquidity Constraints and Student Loans"
Document that parental support for children varies with housing cycles
Document that parental support for children varies with housing cycles
Adds to long literature on how collateralized borrowing in real estate is special in allowing households to borrow much more, for lower interest rates, than uncollateralized lending.
Student loans also special, since not dischargeable in bankruptcy.
Student loans also special, since not dischargeable in bankruptcy.
One of India's most fundamental growth challenges: generating a Ganges corridor.
Why? Because population density drives economic clusters, which boosts specialization and trade and innovation. And this is where India's population is. ~400m people in this box.
Why? Because population density drives economic clusters, which boosts specialization and trade and innovation. And this is where India's population is. ~400m people in this box.
Why is the density relevant? Compare with:
- US northeast, the Boston-Washington corridor. Massive economic/cultural center.
- The Kyoto-Tokyo belt. Linked by Shinkansen trains, this is the economic driver of Japan.
en.wikipedia.org/wiki/Taiheiy%C…
- US northeast, the Boston-Washington corridor. Massive economic/cultural center.
- The Kyoto-Tokyo belt. Linked by Shinkansen trains, this is the economic driver of Japan.
en.wikipedia.org/wiki/Taiheiy%C…
The density of India's Ganges corridor is on par with, if not greater than, other global clusters. Bihar, for instance, has a density of ~1,110 people/sq km. That's over 2x of the Netherlands; on par with the Japanese cluster.
Yet, with a population of 100m, only one city >500k
Yet, with a population of 100m, only one city >500k
Does auto-enrollment into 401(k) retirement accounts increase savings?
Surprisingly, a common finding is *not always.* A look at this literature:
1/
Surprisingly, a common finding is *not always.* A look at this literature:
1/
Mardrian and Shea (2001) launched the literature on automatic enrollment. Just from the summary table, you see almost 50 percent of workers got 401(k)s in the cohort defaulted to automatic enrollment; relative to previous cohorts.
Seems valuable!
ssc.wisc.edu/~scholz/Teachi…
2/
Seems valuable!
ssc.wisc.edu/~scholz/Teachi…
2/
But they caution:
"Simulation results reported in a previous version of this paper ... show that default savings behavior under automatic enrollment may actually lead to lower total 401(k) savings after only a few years relative to more traditional 401(k) plans"
3/
"Simulation results reported in a previous version of this paper ... show that default savings behavior under automatic enrollment may actually lead to lower total 401(k) savings after only a few years relative to more traditional 401(k) plans"
3/
@dandolfa @arindube @1954swilliamson @gabriel_mathy @teasri @IvanWerning @farmerrf @Noahpinion @asymptosis Sure! First, here is aggregate corporate debt
The riskier stuff consists of levered loans -- adjustable interest rate, low covenant protection -- and often securitized in CLOs (now CLO-squared too wsj.com/articles/hedge…)
The riskier stuff consists of levered loans -- adjustable interest rate, low covenant protection -- and often securitized in CLOs (now CLO-squared too wsj.com/articles/hedge…)
@dandolfa @arindube @1954swilliamson @gabriel_mathy @teasri @IvanWerning @farmerrf @Noahpinion @asymptosis This CLO market has grown a ton recently, assisted by their removal from risk-retention requirements
nytimes.com/2018/10/19/bus…
nytimes.com/2018/10/19/bus…
@dandolfa @arindube @1954swilliamson @gabriel_mathy @teasri @IvanWerning @farmerrf @Noahpinion @asymptosis To be fair, this stuff is commonly seen as safer and did not default much, even through crisis.
But the stuff we have today has the potential to be different. For one - the weak covenants can enable asset tunneling
bloomberg.com/news/articles/…
But the stuff we have today has the potential to be different. For one - the weak covenants can enable asset tunneling
bloomberg.com/news/articles/…
Day 2 of the #CEPR Household Finance conference
Day 1 here
Credit Smoothing by Arna Olafsson, Michaela Pagel and Sean Hundtofte
Use of high interest borrowing (in Iceland, overdraft checking accounts):
- heavily used in good times (-> high fees)
- not used to smooth consumption in times of unemployment
Use of high interest borrowing (in Iceland, overdraft checking accounts):
- heavily used in good times (-> high fees)
- not used to smooth consumption in times of unemployment
Job market candidates in Econ/Finance out there? Some tips on finishing up
You should have a rough draft at this point, a good sense of what to do to polish everything up, and a plan with your advisors on how to do that.
If you don't - make a final push or wait until next year
You should have a rough draft at this point, a good sense of what to do to polish everything up, and a plan with your advisors on how to do that.
If you don't - make a final push or wait until next year
By the time the semester starts, you should have:
1. A JMP draft (see @JohnHCochrane's guide: faculty.chicagobooth.edu/john.cochrane/…)
2. A good deck (see @paulgp's guide: github.com/paulgp/beamer-… and Jesse Shapiro brown.edu/Research/Shapi…)
1. A JMP draft (see @JohnHCochrane's guide: faculty.chicagobooth.edu/john.cochrane/…)
2. A good deck (see @paulgp's guide: github.com/paulgp/beamer-… and Jesse Shapiro brown.edu/Research/Shapi…)
Treat your internal presentations like job talks - they are in a sense since you have to convince your home department first
Take all the comments to heart, fix as many of them as you can
But definitely collect them to know what's coming
Take all the comments to heart, fix as many of them as you can
But definitely collect them to know what's coming
THREAD: Here is what I have learned from being an Assistant Professor at @NYUStern for two years! Will go through the tripod of service, teaching, and research.
First, some meta-advice: all advice is either 1) here’s what I did, it worked for me, you should do it too; or 2) I didn’t do this, I wish I had, learn from my mistakes. This is a mix of the two!
1. SERVICE - Show up to the office, keep your door open, sign up for all of the visiting speakers, and go to as many dinners as you can.
