Does COVID-19 really make people risk aversion in investment decision-making?

The economic fallout from COVID-19 pandemic changes individuals’ investment perceptions and behaviors in a tremendous way. Consequently, investment decision-making has been affected as people have to adjust to the new environment. This study aims to study whether COVID-19 really make people risk aversion due to the economic slowdown. Our empirical results are analyzed from household finance data in U.S in July 2021. It is found that COVID-19 proximity, income, and occupation are positively associate with risking taking in investment decision-making, while age and family size are not. This study contributes to the newly emerged body of knowledge on post pandemic investment decision-making and risk behavior analysis and provide implications for financial investment institutions.

Internal Rate of Return on Investment in Higher Education in Europe

The study aims to update the well-settled issue in literature of rate of return on investment in higher education in Europe. The proposed approach slightly modifies the existing methodology based on the Mincer equation, using an updated set of data for the period 2014–2016 from the European Central Bank's ‘Household Finance and Consumption Survey’. The results obtained, ranging between 13% and 21%, are higher compared to historical records for the years 1996–2013. As for the microeconometric estimates of the Mincer-type equation, they are sound and comparable, although showing higher margins in relation to the recent figures. Thus, they may suggest an increasing trend in valuation and importance of human capital based on high school degree, especially for the Central–Eastern European Union countries, resulting probably from rapid economic and cultural convergence.

Household Finance

Household financial decisions are complex, interdependent, and heterogeneous, and central to the functioning of the financial system. We present an overview of the rapidly expanding literature on household finance (with some important exceptions) and suggest directions for future research. We begin with the theory and empirics of asset market participation and asset allocation over the life cycle. We then discuss household choices in insurance markets, trading behavior, decisions on retirement saving, and financial choices by retirees. We survey research on liabilities, including mortgage choice, refinancing, and default, and household behavior in unsecured credit markets, including credit cards and payday lending. We then connect the household to its social environment, including peer effects, cultural and hereditary factors, intra-household financial decision-making, financial literacy, cognition, and educational interventions. We also discuss literature on the provision and consumption of financial advice. (JEL D15, G41, G50, J26, Z13)

The Impact of Medical Insurance on Household Stock Market Participation: Evidence From China Household Finance Survey

This paper explores the impact of medical insurance on the possibility of household participation in the stock market and the portfolio share of equity, applying Probit, and Tobit models with the data from China Household Finance Survey (CHFS). The empirical results highlight that participating in medical insurance can significantly increase the possibility of households participating in the stock market and the portfolio share of equity, and have passed the robustness tests, including propensity score matching (PSM), altering estimation methods, replacing explained variables, and eliminating samples. Besides, heterogeneity analysis shows that the impact of medical insurance on household stock market participation is more significant in eastern region, urban areas, and households with higher income level. Further mechanism analysis implies that household participation in medical insurance mainly affects their stock market participation through preventive savings effect. It is necessary to improve the medical insurance system and encourage household participation in stock market so as to further promote financial development in China.

Intergenerational Redistributive Effects of Monetary Policy

This paper investigates the distributional consequences of monetary policy across generations. We use a life-cycle model with a rich asset structure as well as nominal and real rigidities, calibrated to the euro area using both macroeconomic aggregates and microeconomic evidence from the Household Finance and Consumption Survey. We show that the life-cycle profiles of income and asset accumulation decisions are important determinants of redistributive effects of monetary shocks. The redistribution is mainly driven by nominal assets and labor income, less by real financial assets and housing. Overall, we find that a typical monetary policy easing redistributes welfare from older to younger generations, and decreases net worth inequality associated with life-cycle motives.

LAS FINANZAS DE LOS HOGARES MEXICANOS: ANÁLISIS CON REDES BAYESIANAS

<p>El bienestar de los hogares está ligado en gran parte al desarrollo de los mercados financieros. El estudio de las finanzas de los hogares analiza las formas en que estos utilizan instrumentos financieros para satisfacer sus necesidades y objetivos; este análisis representa un gran desafío debido a la escasa información estadística y la interrelación entre las variables consideradas. En este trabajo, pionero en el uso de las redes bayesianas en este campo, utilizamos de manera conjunta las finanzas tradicionales y las conductuales. Medimos la probabilidad de prevalencia de estabilidad financiera de los hogares en México; obtenemos un resultado base y posteriormente, al generar distintos escenarios, descubrimos que las variables más determinantes son el manejo del crédito y la conformación de los hogares. Estos resultados subrayan la importancia de promover iniciativas de educación financiera en los distintos niveles, modalidades y subsistemas educativos.</p><p><strong> </strong></p><p align="center">THE FINANCE OF MEXICAN HOUSEHOLDS: ANALYSIS WITH BAYESIAN NETWORKS</p><p align="center"><strong>ABSTRACT</strong></p><p>In today's economy, the well-being of households is considered to be linked mainly to the development of financial markets. The field of household finance analyzes how households use financial instruments to satisfy their needs and achieve objectives. This analysis represents a significant challenge due to scarce statistical information and the interrelation among the variables involved. We follow two aspects: Traditional and behavioral finance. This paper pioneers the use of Bayesian networks in the field. A model measuring the probability of prevalence of financial stability of households in Mexico is used; a baseline result is obtained and then, while generating different scenarios, we discover that credit management and household composition are the most determining variables. These results underscore the importance of promoting different financial education initiatives at different educational levels, modalities, and subsystems.</p>

Does Land Expropriation Experience Increase Farmers’ Farmland Value Expectations? Empirical Evidence from the People’s Republic of China

Understanding the formation mechanism of farmers’ farmland value expectations not only helps to evaluate farmers’ land resource allocation behaviors, but also enables the government to create better policies that can effectively guide and manage farmers’ land value expectations. Based on cross-sectional data from the 2015 China Household Finance Survey (CHFS) of rural residents, we used quantitative analysis models to identify the effect of farmers’ land expropriation experiences on their farmland value expectations, and the mechanisms of this effect. We found that after experiencing land expropriation, farmers’ farmland value expectations significantly increased; the effect was most pronounced in groups of farmers with low prior expectations. Land expropriation experience raises farmers’ farmland value expectations due to land scarcity. The use of monetized compensation in the process of land expropriation will significantly increase farmers’ farmland value expectations. The results suggest that land expropriation activities can directly change the land resource endowment of farmers, thereby stimulating farmers’ awareness of the need to protect their land rights and economic rights.

Consumer debt holding, income and happiness: evidence from China

PurposeThe relationship between debt and happiness is an emerging research topic with significant implications for both theory and practice in economics and business. In China, where the consumer credit market is at an early stage of development, the topic remains under-investigated and the evidence on the debt–well-being link is scarce. The purpose of this study is to examine the association between debt holding and happiness and the moderating role of income in it.Design/methodology/approachData used in the study were from three waves (2013, 2015 and 2017) of the China Household Finance Survey. Fixed-effect regressions on panel data were used for data analyses.FindingsThe results show that any type of debt holding is negatively associated with happiness. Among seven specific types of debts, four types show negative associations with happiness, which in the order from higher to lower associations, are medical, education, other and housing debt. In addition, negative associations between debt holding and happiness vary among income groups. The results suggest that any debt holding potentially decreases happiness for low- and middle-income consumers only. In addition, holdings of three specific types of debts (medical, education and housing debt) may decrease happiness for both low- and middle-income consumers, and holding two types of debts (business and other debt) may decrease happiness for middle-income consumers only.Research limitations/implicationsData used in this study originate from one country only. It limits the generalizability of findings to other countries with different institutional backgrounds and different socio-economic characteristics of populations. The results have implications for researchers who study consumer debt behavior and business practitioners who do businesses with Chinese companies and consumers.Practical implicationsChina is an emerging economy that is at the early stage of credit market development. The results of this study provide helpful information and insights for business practitioners to explore credit markets and serve credit product clients with various income levels in China.Social implicationsThe results of this study are informative for public policies. When introducing credit market-related policies, policymakers should pay attention to people's happiness and to differential welfare effects of holdings of different types of debts and among consumers with various levels of incomes.Originality/valueUnique contributions of this study include using data from the most recently available waves of the China Household Finance Survey (2013, 2015 and 2017) to study the associations between debt holding and happiness. In addition, the findings of this study enrich the literature of debt and happiness by adding evidence from China, the largest emerging economy in the world, which is helpful for future theory building and business practice on the relationship between debt holding and happiness.