infonet-economy

This paper evaluates individuals’ ability to avoid investment mistakes and analyzes how investment competence is related to the propensity to seek or rely on professional advice. To address these issues, we use novel survey data collected from a representative sample of Swiss households. We find that investment competence is characterized by significant age and gender gaps, and that...

We investigate the effect of monetary policy on stock market bubbles and trading behavior in experimental asset markets. We introduce the possibility of investing in interest bearing bonds to the widely used laboratory asset market design of Smith et al. (1988). Treatment groups face a variable interest rate policy which depends on asset prices, while control groups are subjected to...

We present a flexible and scalable method to compute global solutions of high-dimensional non-smooth dynamic models. Within a time-iteration setup, we interpolate policy functions using an adaptive sparse grid algorithm with piecewise multi-linear (hierarchical) basis functions. As the dimensionality increases, sparse grids grow considerably slower than standard tensor product grids...

Based on a large international survey we analyze how German- French- and Italian-speaking Swiss differ in their investment decision behavior and competence as compared to their closest neighbors abroad speaking the same language. Although language may be closer to the individual self than the country of residence, we find that there are greater similarities in the decision...

The depth of the recent financial crisis is often attributed to excessively high leverage of corporations and banks. This column analyses corporate leverage in the long-run, and in particular the shift from bilateral to multilateral firm-bank relationships in the UK. This shift is related to the firms’ use of debt finance, and subsequently to their increased leverage

The majority of academic economists share the view that a corporation should serve the exclusive interests of its shareholders (shareholder value maximization). This view is fi rmly grounded on the extension, by Arrow (1953) and Debreu (1959) of the two welfare theorems to production economies with uncertainty and complete markets. This paper considers a variant of the Arrow-Debreu...