Home away from home? Foreign demand and London house prices

Identifying the effects of “flights to safety” on asset prices using pure time-series methods is difficult because crises are infrequent. We develop a new cross-sectional identification approach, motivated by the insight that investors may differ in their “preferred habitats” within a broad asset class. We apply the method to the question of whether foreign capital is responsible for residential real estate price movements in global cities such as London and New York, especially during crises. Using large data sets of housing transactions, we find that foreign risk strongly affects London house prices. The effects are long-lasting, and are associated with both safe-haven effects and immigration

Reference dependence in the housing market

We quantify reference dependence and loss aversion in the housing market using rich Danish administrative data. Our structural model includes loss aversion, reference dependence, fnancial constraints, and a sale decision, and matches key nonparametric moments, including a “hockey stick” in listing prices with nominal gains, and bunching at zero realized nominal gains. Households derive substantial utility from gains over the original house purchase price; losses afect households roughly 2.5 times more than gains. The model helps explain the positive correlation between aggregate house prices and turnover, but cannot explain visible attenuation in reference dependence when households are more fnancially constrained

Towards designing robo-advisors for unexperienced investors with experience sampling of time-series data

We propose an experimental study to examine how to optimally design a robo-advisor for the purposes of financial risk taking. Specifically, we focus on robo-advisors which are able to (i) “speak” the language of the investors by communicating information on the statistical properties of risky assets in an intuitiveway, (ii) “listen” to the investor by monitoring her emotional reactions and (iii) do both. The objectives of our study are twofold. First, we aim to understand how robo-advisors affect financial risk taking and the revisiting of investment decisions. Second, we aim to identify who is most affected by robo-advice

International Comparative Household Finance

This article reviews the literature on international comparative household finance. It presents summary statistics on household balance sheets for 13 developed countries and uses these statistics to discuss common features and contrasts across countries. It then discusses retirement savings, investments in risky assets, unsecured debt, and mortgages