Research in Progress

"Liquidity, Social Security and the Demand for Annuities at Retirement: A Quantitative Exercise", work in progress

Abstract: Since Yaari (1965) we know that under certain conditions an agent facing an uncertain lifespan should invest all her wealth in annuities. However, empirical annuitization levels are very low. One potential explanation for this puzzling result is the existence of uninsurable shocks that generate a demand for liquid assets. If annuities are illiquid, then agents may choose low annuitization levels for insurance purposes. This paper carries out a quantitative exploration of the magnitude of this effect. In particular, I explore the nature and size of the shocks that could generate the observed annuitization decisions at retirement; this information can then be compared with evidence on the consumption patterns of retirees to assess the role of uninsurable shocks in portfolio decisions at retirement.

“Happy Tiger, Expensive Dragon? Speculation, Optimism, and Segmentation in China’s Stock Market,” with Tatiana Didier, work in progress

Abstract: Chinese stock markets were completely segmented until very recently. Firms could issue identical shares except for ownership restrictions: shares for domestic investors (A shares) and shares for foreign investors (B and H shares). Although domestic shares traded in other markets in similar situations have usually been traded at a discount, in China A shares are traded at a premium over B and H shares. In this project, we explore this apparent disparity. We extend a model of speculation and optimism in stock markets to incorporate heterogeneous investors and segmented markets. Preliminary results confirm that both different rates of returns, because of segmented markets, and speculation play a role explaining the A-B and A-H premiums. Furthermore, a regulatory change allowing domestic investors to trade B shares let us empirically analyze the mechanisms proposed using the still segmented H market.

"Unemployment Insurance, Moral Hazard and Liquidity: The Role of Precautionary Savings", work in progress

"'Multinationals in a Model with Sorting and Matching: A Note", work in progress