Research Seminar

December 6 at 4.40 pm, room 3211 ICEF/LFE held the Research Seminar in Finance.
Speaker: Artashes Karapetyan (Norges Bank)

December 6 at 4.40 pm, International College of Economics and Finance and International Laboratory of Financial Economics held the Research Seminar in Finance.
Speaker: Artashes Karapetyan (Norges Bank)
Theme: «Hidden Costs of Hidden Debt» 
Venue: Shabolovka st. 26, building 3, room 3211

Abstract: We argue that salience - the extent to which a cost is visible and difficult to ignore - may have economically significant effects on homeowners' borrowing behavior, through a bias towards less salient but more expensive loans. We first report survey evidence consistent with some homeowners having this bias. Next, we use a simple model to show that the presence of some biased consumers in the market will affect equilibrium prices. We then proceed to show that market data support the predictions of the model. We conduct several robustness checks to address unobserved heterogeneity. The observed effect is large.

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