Structuring Mortgages for Macroeconomic Stability
We study mortgage design features aimed at stabilizing the macroeconomy. We model overlapping generations of mortgage borrowers and an infinitely lived risk-averse representative mortgage lender. Mortgages are priced using an equilibrium pricing kernel derived from the lender's endogenous consumption. We consider an adjustable-rate mortgage (ARM) with an option that during recessions allows borrowers to pay only interest on their loan and extend its maturity. We find that this maturity extension option stabilizes consumption growth over the business cycle, shifts defaults to expansions, and is welfare enhancing. The cyclical properties of the maturity extension ARM are attractive to a risk-averse lender so the mortgage can be provided at a relatively low cost.
We thank Nick Roussanov, Amit Seru, Joel Shapiro, Alexei Tchistyi and participants at the AFA meetings (Atlanta), Tenth Macro Finance Society Workshop (Boston College), the Second London Financial Intermediation Workshop (Bank of England), NBER Summer Institute (Capital Markets and the Economy, Real Estate), and at the European Central Bank seminar series for comments. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
John Y. Campbell
A. Compensated Activities (1)
Founding partner since 1999, Arrowstreet Capital, LP:
Consultant to European Fund and Asset Management Association (EFAMA) research project on a pan-European pension fund product. Research conducted by SDA Bocconi School of Management faculty Andrea Berardi, Claudio Tebaldi, and Fabio Trojani, 2017-18.
Alfred P. Sloan Foundation grant for international comparative studies of household finance, 2011-2014.
Brookings Institution paper with Robert Shiller and Luis M. Viceira, “Understanding Inflation-Indexed Bond Markets”, Brookings Papers on Economic Activity 79-120, Spring 2009.
National Bureau of Economic Research, conference on Asset Prices and Monetary Policy, 2007.
Journal of Investment Management, 2007.
Mellon Global Investments, Brazil, 2007.
Real Colegio Complutense, 2007 and 2008.
Pension Real Estate Association, 2008.
International Conference on Economics, Finance, and Accounting, National Taiwan University, 2009.
China International Conference in Finance, Beijing, 2010.
Forum for the Future of Higher Education, Aspen, 2011.
Karl Borch Lecture, NHH, Bergen, Norway, 2011.
David Kinley Lecture, University of Illinois, 2012.
Purvis Lecture, Canadian Economic Association, 2012.
Morgan Stanley Lecture, New Economic School, Moscow, 2012.
International Monetary Fund, Washington, DC, 2012.
Hirtle Callaghan Investment Leadership Award, Philadelphia, PA, 2013.
European Financial Management Association, Reading, UK, 2013.
600th Anniversary Lecture, University of St. Andrews, 2013.
Northern Finance Association, Québec, 2013.
Eugene Fama Prize for Outstanding Contributions to Doctoral Education, University of Chicago Booth School of Business, with Andrew Lo and Craig MacKinlay, 2014.
Doctor Honoris Causa, Copenhagen Business School, 2015.
Miami Behavioral Finance Conference, 2015.
ECB Conference on Household Finance and Consumption, Frankfurt, 2015.
Ely Lecture, American Economic Association, 2016.
Gary P. Brinson Lecture, Washington State University, 2016.
Finance Down Under Conference, University of Melbourne, 2016.
Belgian Financial Research Forum, Brussels, 2016.
Arrow Lectures, Stanford University, 2017.
Conference on the Econometrics of Financial Markets, Stockholm, 2017.
3rd BI-ShoF Conference on Asset Pricing and Financial Econometrics, Oslo, 2017.
10th Macro Finance Society Workshop, Boston, 2017.
B. Significant Non-Compensated Activities
American Economic Association: Executive Committee, 2016-18.
American Economic Journal Macroeconomics: Editorial Board, 2007-09.
Andover Newton Theological School: Board of Trustees, 2012-17.
Consumer Financial Protection Bureau: Academic Research Council, 2012-17.
Econometric Society: Council, 2002-09; Investments Committee, 2006-10.
Harvard Management Company: Board, 2004-11.
International Atlantic Economic Society: President, 2008-09.
Journal of Financial Econometrics: Advisory Board, 2001-present.
Journal of Financial Economics: Advisory Board, 2007-present.
Journal of Money, Credit, and Banking: Advisory Board, 2001-present.
National Bureau of Economic Research: Pension Plan Fiduciary, 2015-present.
Office of Financial Research, US Treasury: Financial Research Advisory Committee, 2014-18.
Oxford-Man Institute: Academic Advisory Board, 2012-15.
Right Question Institute: Board of Trustees, 2018-present.
(1) Excludes honoraria from non-profit institutions, government agencies, and academic journals of $3,000 or less in a given year, and payments from for-profit firms of $500 or less in a given year
John Y. Campbell & Nuno Clara & João F. Cocco, 2021. "Structuring Mortgages for Macroeconomic Stability," Journal of Finance, American Finance Association, vol. 76(5), pages 2525-2576, October. citation courtesy of
JOHN Y. CAMPBELL & NUNO CLARA & JOÃO F. COCCO, 2021. "Structuring Mortgages for Macroeconomic Stability," The Journal of Finance, vol 76(5), pages 2525-2576.