Economics at your fingertips  

Household Finance

John Campbell ()

No 12149, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The welfare benefits of financial markets depend in large part on how effectively households use these markets. The study of household finance is challenging because household behavior is difficult to measure accurately, and because households face constraints that are not captured by textbook models, including fixed costs, uninsurable income risk, borrowing constraints, and contracts that are non-neutral with respect to inflation. Evidence on participation, diversification, and the exercise of mortgage refinancing options suggests that many households are reasonably effective investors, but a minority make significant mistakes. This minority appears to be poorer and less well educated than the majority of more successful investors. There is some evidence that households understand their own limitations, and try to avoid financial strategies that require them to make decisions they do not feel qualified to make. Some financial products involve a cross-subsidy from naive households to sophisticated households, and this can inhibit the emergence of products that would promote effective financial decision making by households.

JEL-codes: G12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-cfn, nep-fin and nep-fmk
Date: 2006-04
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (455) Track citations by RSS feed

Published as Campbell, John Y. "Household Finance," Journal of Finance, 2006, v61(4,Aug), 1553-1604.

Downloads: (external link) (application/pdf)

Related works:
Journal Article: Household Finance (2006) Downloads
Working Paper: Household Finance (2006) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().

Page updated 2019-06-23
Handle: RePEc:nbr:nberwo:12149