Homeowners at risk of default face a debt overhang that reduces their incentive to invest in their property: in expectation, some value created by investments in the property will go to the lender. This agency conflict affects housing investments. Homeowners at risk of default cut back substantially on home improvements and mortgage principal payments, even when they appear financially unconstrained. Meanwhile, they do not reduce spending on assets that they may retain in default, including home appliances, furniture, and vehicles. These findings highlight an important financial friction that has stifled housing investment since the Great Recession.

This study analyzes the distribution of investment horizons in a large, proprietary panel of all shareholders in one no‐load mutual fund family. A proportional hazards model shows that there are observable shareholder characteristics that enable the fund to predict reliably on the day each account is opened whether the account will be short term or long term. Simulations show that the liquidity costs imposed on the fund by the expected short‐term shareholders are significantly greater than those imposed by the expected long‐term shareholders. Combining these results, the analysis argues that mutual funds do not provide equitable liquidity‐risk insurance.

This study provides evidence that highly leveraged owner‐managed properties liquidated assets during the commercial real estate decline of the late 1980s, and that this provided buying opportunities for better capitalized buyers. The analysis documents significant financial distress costs for highly leveraged firms during an industry‐wide downturn and shows that these costs are particularly large for owner‐managed firms.

This paper analyzes asset pricing in a partially segmented market where citizens of a small country are allowed to hold only their domestic securities, whereas the rest of the investors (“foreigners”) are essentially allowed to hold all securities. In this market setting it may occur that the citizens of the small country are willing to pay less for their domestic securities than are the foreign investors. The paper derives equilibrium required rates of return for different investors in this market setting which perfectly occurred in Finland and tests this equilibrium model using data from the Finnish stock market. Empirical results are consistent with the hypotheses derived from the model.

William T. Ziemba, The Buying and Selling Behavior of Individual Investors at the Turn of the Year: Discussion, The Journal of Finance, Vol. 43, No. 3, Papers and Proceedings of the Forty-Seventh Annual Meeting of the American Finance Association, Chicago, Illinois, December 28-30, 1987 (Jul., 1988), pp. 717-719

Douglas T. Breeden, The Term Structure: Discussion, The Journal of Finance, Vol. 35, No. 2, Papers and Proceedings Thirty-Eighth Annual Meeting American Finance Association, Atlanta, Georgia, December 28-30, 1979 (May, 1980), pp. 435-438