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UID:cfff612fb79bc7e26d5c373f227aa599
CATEGORIES:Seminars
CREATED:20170418T174902
SUMMARY:Lunch Seminar: Anton Tsoy - EIEF
DESCRIPTION;ENCODING=QUOTED-PRINTABLE:Distorted Advice in the Mortgage Market: Theory and Structural Estimation (
 with L. Guiso, A. Pozzi, L. Gambacorta, P. Mistrulli)\nAbstract:\n Complex 
 financial decisions, such as choosing the mortgage type, require some degre
 e of sophistication to form expectations about the future evolution of econ
 omic conditions. This provides banks, who often advise households, with an 
 opportunity to steer unsophisticated households choices in a way that benef
 its them though not necessarily be in the household best interest. We set u
 p a structural model of financial advice and estimate it exploiting adminis
 trative data on the universe of mortgages issued to Italian households. In 
 the model, there are two types of households: Sophisticated households are 
 perfectly informed and know which mortgage is best for them; naive househol
 ds are instead susceptible to advice and will take the type of mortgage rec
 ommended by the bank. Each bank has an ideal mix of issued fixed and adjust
 able rate mortgages and attempts to achieve it by both appropriately settin
 g the rates and strategically providing advice to its clientele. Banks comp
 ete in setting rates and households search. We recover the primitives of th
 e model, in particular the share of “sophisticated” and “naive” households 
 in the population, and use them to quantify the welfare implications of bia
 sed financial advice. In a counterfactual exercise, we study the effect of 
 a financial literacy initiative which improves the general financial knowle
 dge of the public reducing the scope for biased advice.\n
DTSTAMP:20260405T181148Z
DTSTART:20160620T130000Z
DTEND:20160620T140000Z
SEQUENCE:0
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