Household Finance

Gomes, Francisco; Haliassos, Michael; Ramadorai, Tarun

doi:10.1257/jel.20201461

Cited by 235 publications

(75 citation statements)

References 586 publications

(529 reference statements)

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“…We also examine how such guarantees affect saving and investment behavior inside and outside of such accounts, and retirement wellbeing, while incorporating important aspects of the tax structure, social security benefits, and capital markets (e.g., Cocco and Gomes, 2012;Horneff et al, 2015Horneff et al, , 2018. Our research, therefore, contributes to the rich literature on financial decisionmaking of private households (see Gomes et al, 2020a, for an overview) using dynamic consumption and portfolio choice models in discrete time.…”

Section: Introductionmentioning

confidence: 99%

Money-Back Guarantees in Individual Retirement Accounts: Still a Good Deal?

Horneff¹,

Liebler²,

Maurer³

et al. 2019

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In the wake of the financial crisis and continued volatility in international capital markets, there is growing interest in mechanisms that can protect people against retirement account volatility. This paper explores the consequences for savers' wellbeing of implementing market-based retirement account guarantees, using a life cycle consumption and portfolio choice model where investors have access to stocks, bonds, and tax-qualified retirement accounts. We evaluate the case of German Riester plans adopted in 2002, an individual retirement account produce that includes embedded mandatory money-back guarantees. These guarantees influenced participant consumption, saving, and investment behavior in the higher interest rate environment of that era, and they have even larger impacts in a low-return world such as the present. Importantly, we conclude that abandoning these guarantees could enhance old-age consumption for over 80% of retirees, particularly lower earners, without harming consumption during the accumulation phase. Our results are of general interest for other countries implementing default investment options in individual retirement accounts, such as the U.S. 401(k) defined contribution plans and the Pan European Pension Product (PEPP) recently launched by the European Parliament.

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Section: Introductionmentioning

confidence: 99%

Money-Back Guarantees in Individual Retirement Accounts: Still a Good Deal?

Horneff¹,

Liebler²,

Maurer³

et al. 2019

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“…Household finance is the science devoted mainly to wealth, consumption level and patterns, financial literacy, portfolio allocation, and debt decisions (Gomes et al, 2021(Gomes et al, , pp. 919-1000Guiso & Sodini, 2013, pp.…”

Section: Introductionmentioning

confidence: 99%

Implementing artificial intelligence in forecasting the risk of personal bankruptcies in Poland and Taiwan

Korol

Fotiadis

2022

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Research background: The global financial crisis from 2007 to 2012, the COVID-19 pandemic, and the current war in Ukraine have dramatically increased the risk of consumer bankruptcies worldwide. All three crises negatively impact the financial situation of households due to increased interest rates, inflation rates, volatile exchange rates, and other significant macroeconomic factors. Financial difficulties may arise when the private person is unable to maintain a habitual standard of living. This means that anyone can become financially vulnerable regardless of wealth or education level. Therefore, forecasting consumer bankruptcy risk has received increasing scientific and public attention. Purpose of the article: This study proposes artificial intelligence solutions to address the increased importance of the personal bankruptcy phenomenon and the growing need for reliable forecasting models. The objective of this paper is to develop six models for forecasting personal bankruptcies in Poland and Taiwan with the use of three soft-computing techniques. Methods: Six models were developed to forecast the risk of insolvency: three for Polish households and three for Taiwanese consumers, using fuzzy sets, genetic algorithms, and artificial neural networks. This research relied on four samples. Two were learning samples (one for each country), and two were testing samples, also one for each country separately. Both testing samples contain 500 bankrupt and 500 nonbankrupt households, while each learning sample consists of 100 insolvent and 100 solvent natural persons. Findings & value added: This study presents a solution for effective bankruptcy risk forecasting by implementing both highly effective and usable methods and proposes a new type of ratios that combine the evaluated consumers? financial and demographic characteristics. The usage of such ratios also improves the versatility of the presented models, as they are not denominated in monetary value or strictly in demographic units. This would be limited to use in only one country but can be widely used in other regions of the world.

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“…Our paper contributes to different strands of the literature. First, we add to the general literature on household finance (Campbell, 2006;Beshears et al, 2018;Gomes et al, 2020) and in particular on financial mistakes (e.g. Calvet et al, 2007Calvet et al, , 2009a.…”

Section: Introductionmentioning

confidence: 99%