02177cam a22002657 4500001000700000003000500007005001700012008004100029100002200070245006600092260006600158490004200224500001600266520050400282520050300786520014701289530006101436538007201497538003601569690011201605710004201717830007701759856003801836856003701874w12149NBER20141227131848.0141227s2006 mau||||fs|||| 000 0 eng d1 aCampbell, John Y.10aHousehold Financeh[electronic resource] /cJohn Y. Campbell. aCambridge, Mass.bNational Bureau of Economic Researchc2006.1 aNBER working paper seriesvno. w12149 aApril 2006.3 aThe 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 of3 amortgage 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 to3 asophisticated households, and this can inhibit the emergence of products that would promote effective financial decision making by households. aHardcopy version available to institutional subscribers. aSystem requirements: Adobe [Acrobat] Reader required for PDF files. aMode of access: World Wide Web. 7aG12 - Asset Pricing • Trading Volume • Bond Interest Rates2Journal of Economic Literature class.2 aNational Bureau of Economic Research. 0aWorking Paper Series (National Bureau of Economic Research)vno. w12149.4 uhttp://www.nber.org/papers/w1214941uhttp://dx.doi.org/10.3386/w12149