Working Papers
Working Papers
"Giving Up": The Impact of Decreasing Housing Affordability on Consumption, Work Effort, and Investment (with Seung Hyeong Lee)
Abstract: Housing affordability has declined sharply in recent decades, leading many younger generations to give up on homeownership. Using a calibrated life-cycle model matched to U.S. data, we project that the cohort born in the 1990s will reach retirement with a homeownership rate roughly 9.6 percentage points lower than that of their parents' generation. The model also shows that as households' perceived probability of attaining homeownership falls, they systematically shift their behavior: they consume more relative to their wealth, reduce work effort, and take on riskier investments. We show empirically that renters with relatively low wealth exhibit the same patterns. These responses compound over the life cycle, producing substantially greater wealth dispersion between those who retain hope of homeownership and those who give up. We propose a targeted subsidy that lifts the largest number of young renters above the "giving-up threshold." This policy yields welfare gains that are 3.2 times those of a uniform transfer and 10.3 times those of a transfer targeted to the bottom 10% of the wealth distribution, while also increasing homeownership rate, raising work effort, and reducing reliance on the social safety net.
Coverage: Washington Post, Financial Times, Fortune 1, Fortune 2, The New York Times, Marginal Revolution, Fox Business, Realtor.com, Macro Roundup, Le Figaro
Are Institutional Investors Sleeping on Yield? An Analysis of Inertia in Money Market Fund Choices (with Ali Hortacsu)
Disagreement, Subjective Uncertainty, and the Stock Market (with Jingoo Kwon and Seung Hyeong Lee)
Abstract: We propose a new method to separately quantify investor disagreement and subjective uncertainty at the firm level using equity analyst forecasts. Our approach exploits heterogeneity in how forecast dispersion responds to the arrival of signals that are widely perceived as informative and interpreted homogeneously across agents. Intuitively, for a given level of disagreement in point forecasts, a larger post-signal compression in dispersion indicates greater ex-ante subjective uncertainty in investors’ beliefs. Using these measures, we document differences in the economic roles of disagreement and uncertainty. Subjective uncertainty rises sharply prior to crises, while disagreement peaks during and immediately after crises. In the cross-section, stocks with higher disagreement earn lower subsequent returns and exhibit higher trading volume. These effects are significantly attenuated when uncertainty is high. In contrast, higher uncertainty is associated with higher expected returns and lower trading volume. Stock return volatility is strongly related to disagreement but only weakly related to uncertainty. Finally, firm characteristics are more closely linked to disagreement than to uncertainty: Smaller firms, firms with lower profitability, and firms with higher R&D intensity exhibit systematically higher levels of disagreement.
Households' Liquidity Management and Endogenous Sorting of Bank Depositor Types
Youth Runs (with Luis Garicano)
Addiction Runs: Rank Competition and Strategic Complementarities in Prescription Stimulant Usage (with Chanwool Kim and Giyoung Kwon)
Relying on Unregulated Firms to Achieve Public Health Goals: Evidence from Pharmacies in Kenya (with Michael Dinerstein, Anne Karing, and Emma Yan)
Retail Drugstore Closures and the Declining Drug-Retail Complementarity (with Chanwool Kim)
Package Sizes and Unequal Burden of Inflation (with Chanwool Kim and Youngeun Lee)
Housing Tenure as an Investment Decision: Evidence from Survey and Field Experiments (with Chanwool Kim)
What Drives Gold Prices? (with Robert Barsky, Craig Epstein, and Adrian Lafont-Mueller)
Chicago Fed Letter, 464 (2021), 1-6.
Abstract: A half century after gold ceased to play a significant formal role in the international monetary system, it still captures a great deal of attention in the financial press and the popular imagination. Yet there has been very little scrutiny of the primary factors determining the price of gold since its dollar price was first allowed to vary freely in 1971. In this article, we attempt to fill in that gap by highlighting three considerations that are commonly cited as drivers of gold prices: inflationary expectations, real interest rates, and pessimism about future macroeconomic conditions.
Coverage: J.P. Morgan Center for Commodities