Housing forms a large share of household wealth in many nations. Using comparable data for the US and England, this column argues that the nature of housing as an asset – its utility value, illiquidity, and mix of risk and returns – is an important factor in explaining the trajectory of wealth in retirement.
Richard Blundell, Rowena Crawford, Eric French, Gemma Tetlow, 11 May 2016
Matthias Busse, Daniel Gros, 04 April 2016
Through the Eurozone rescue mechanisms, Germany provided the periphery with hundreds of billions in debt at very low rates. There is a widely held notion that these savings would have been better used at home. This column challenges this notion, presenting evidence that Germany’s net asset position held up well, remaining much higher than domestic returns. The main reason is that Germany’s part in the rescue operations was actually much smaller than its claims towards the periphery.
Francesco Bianchi, 22 April 2015
During the Great Recession, the possibility that the US might enter a second Great Depression was a real concern. This column argues that until early 2009, financial markets behaved in a manner consistent with the early years of the Great Depression. The large stock-market fall saw growth stocks outperforming value stocks. This pattern ended March 2009, arguably in light of robust policy interventions. These dynamics suggest that poor performance of growth stocks during regular times may be compensated by superior performance in crises.
Philippe Bacchetta, Kenza Benhima, Céline Poilly, 19 February 2015
The corporate cash ratio – the share of liquid assets in total assets – comoves with employment in the US. This column argues that disentangling liquidity shocks and credit shocks is key to understanding this comovement, and that liquidity shocks appear to be crucial. These shocks make production less attractive or more difficult to finance, while they also generate a need for internal liquidity to pay wages, which can be satisfied by holding more cash.
Tatiana Didier, Roberto Rigobon, Sergio Schmukler, 12 November 2012
Investment through global funds increases year on year. But how and where are global funds’ portfolios allocated? How and which recipient countries, underlying investors, and policymakers benefit? This column argues that global funds in fact represent restrictive investment practises. If we want as many countries, investors and companies to benefit as possible, we must aim to change global funds’ organisational structures and thereby managers’ behaviour.
Kathryn Graddy, 04 January 2008
The market for unusual assets has grown in recent years. Here is a column that reviews the evidence on the market for violins, showing that they have provided a relatively stable return, with low, and in some cases negative, correlation to other assets.