Mutual funds and the U.S. equity market

Mutual funds have become an important intermediary between households and financial markets, especially the equity market. About half of all households have a mutual fund account, and mutual funds hold about one-fifth of household financial assets. Because households have favored equity investments in their mutual fund accounts, mutual funds currently hold about one-fifth of all publicly traded U.S. equities. In addition to discussing the recent growth of mutual funds and their role in household finances, this article analyzes the relationship between households' investment decisions in equity mutual funds and equity market prices.Mutual funds ; Capital market ; Stock market

Personal bankruptcy and credit market competition

The effect of credit market competition on borrower default is theoretically ambiguous, because the quantity of credit supplied may rise or fall following an increase in competition. We investigate empirically the relationship between credit market competition, lending to households, and personal bankruptcy rates in the United States. We exploit the exogenous variation in market contestability brought on by banking deregulation at the state level: after deregulation, banks faced the threat of entry into their state markets. We find that deregulation increased competition for borrowers, prompting banks to adopt more sophisticated credit rating technology. In turn, these developments led previously excluded households to enter the credit market. We document that, following deregulation, (1) overall lending increased, (2) loss rates on loans decreased, and (3) bankruptcy rates rose. Further, we find that lending and bankruptcy rates increased more in states with greater actual (rather than potential) entry, and that credit card productivity increased after the removal of entry restrictions. These findings suggest that entrants brought with them enhanced underwriting technology that allowed for credit extension to new borrowers

The Rent-Price Ratio for the Aggregate Stock of Owner-Occupied Housing

We construct a time series of the rent-price ratio for the owner- occupied stock of housing, starting in 1960:1, by merging micro data from the last five Decennial Censuses of Housing with price indexes for house prices and rents.House Prices, Housing, Rents, CMHPI, Capitalization Rates

Making Sense of the Subprime Crisis

macroeconomics, subprime crisis, foreclosures, market, risk factors

Making sense of the subprime crisis

This paper explores the question of whether market participants could have or should have anticipated the large increase in foreclosures that occurred in 2007 and 2008. Most of these foreclosures stemmed from loans originated in 2005 and 2006, leading many to suspect that lenders originated a large volume of extremely risky loans during this period. However, the authors show that while loans originated in this period did carry extra risk factors, particularly increased leverage, underwriting standards alone cannot explain the dramatic rise in foreclosures. Focusing on the role of house prices, the authors ask whether market participants underestimated the likelihood of a fall in house prices or the sensitivity of foreclosures to house prices. The authors show that, given available data, market participants should have been able to understand that a significant fall in prices would cause a large increase in foreclosures although loan-level (as opposed to ownership-level) models would have predicted a smaller rise than actually occurred. Examining analyst reports and other contemporary discussions of the mortgage market to see what market participants thought would happen, the authors find that analysts, on the whole, understood that a fall in prices would have disastrous consequences for the market but assigned a low probability to such an outcome.Subprime mortgage

YPFS Lessons Learned Oral History Project: An Interview with Andreas Lehnert

Suggested Citation Form: Lehnert, Andreas, 2020. “Lessons Learned Interview. Interview by Mercedes Cardona. Yale Program on Financial Stability Lessons Learned Oral History Project. August 20, 2020. Transcript. https://ypfs.som.yale.edu/library/ypfs-lesson-learned-oral-history-project-interview-andreas- lehner

Financial Vulnerabilities, Macroeconomic Dynamics, and Monetary Policy *

Abstract We define a measure to be a financial vulnerability if, in a VAR framework that allows for nonlinearities, an impulse to the measure leads to an economic contraction. We evaluate alternative macrofinancial imbalances as vulnerabilities: nonfinancial sector credit, risk appetite of financial market participants, and the leverage and short-term funding of financial firms. We find that nonfinancial credit is a vulnerability: impulses to the credit-to-GDP gap when it is high leads to a recession. Risk appetite leads to an economic expansion in the near-term, but also higher credit and a recession in later years, suggesting an intertemporal tradeoff. Monetary policy is generally ineffective at slowing the economy once the credit-to-GDP gap is high, suggesting important benefits from avoiding excessive credit growth. Financial sector leverage and short-term funding do not lead directly to contractions and thus are not vulnerabilities by our definition

Changes in the prevalence, treatment and control of hypertension in Germany? : a clinical-epidemiological study of 50.000 primary care patients

INTRODUCTION: Medical societies have developed guidelines for the detection, treatment and control of hypertension (HTN). Our analysis assessed the extent to which such guidelines were implemented in Germany in 2003 and 2001. METHODS: Using standardized clinical diagnostic and treatment appraisal forms, blood pressure levels and patient questionnaires for 55,518 participants from the cross-sectional Targets and Essential Data for Commitment of Treatment (DETECT) study (2003) were analyzed. Physician's diagnosis of hypertension (HTN(doc)) was defined as coding hypertension in the clinical appraisal questionnaire. Alternative definitions used were physician's diagnosis or the patient's self-reported diagnosis of hypertension (HTN(doc,pat)), physician's or patient's self-reported diagnosis or a BP measurement with a systolic BP≥140 mmHg and/or a diastolic BP≥90 (HTN(doc,pat,bp)) and diagnosis according to the National Health and Nutrition Examination Survey (HTN(NHANES)). The results were compared with the similar German HYDRA study to examine whether changes had occurred in diagnosis, treatment and adequate blood pressure control (BP below 140/90 mmHg) since 2001. Factors associated with pharmacotherapy and control were determined. RESULTS: The overall prevalence rate for hypertension was 35.5% according to HTN(doc) and 56.0% according to NHANES criteria. Among those defined by NHANES criteria, treatment and control rates were 56.0% and 20.3% in 2003, and these rates had improved from 55.3% and 18.0% in 2001. Significant predictors of receiving antihypertensive medication were: increasing age, female sex, obesity, previous myocardial infarction and the prevalence of comorbid conditions such as coronary heart disease (CHD), hyperlipidemia and diabetes mellitus (DM). Significant positive predictors of adequate blood pressure control were CHD and antihypertensive medication. Inadequate control was associated with increasing age, male sex and obesity. CONCLUSIONS: Rates of treated and controlled hypertension according to NHANES criteria in DETECT remained low between 2001 and 2003, although there was some minor improvement