2016 Individual Finance and Insurance Decision Centre Conference (IFID)

The IFID Centre & the DeGroote School of Business at McMaster University will be jointly organizing this year’s conference. The theme will be: The Optimal Household Balance Sheet: Who Has Too Much Debt?

Registration is complimentary but limited. To reserve a seat, please send an email request to Alicja Siek at McMaster University, at: siekal@mcmaster.ca.


Event Details

When: October 19, 2016
Time: 9:00 a.m. to 12:15 p.m.
Where: Ron Joyce Centre, DeGroote School of Business 4350 South Service Road, Burlington, ON L7L 5R8
Cost: Free. Registration is required.
Contact: Alicja Siek

Ron Joyce Centre, DeGroote School of Business 4350 South Service Road, Burlington, ON L7L 5R8

More Information


Guozhong Zhu (University of Alberta)

(co-authors: Vyacheslav Mikhed & Barry Scholnickand)

Personal Bankruptcy Over the Lifecycle

Abstract: Using data on the universe of personal bankruptcy filings for Canadian households, we provide new evidence on the age profiles of the filing bankruptcy rates for both homeowners and renters. These profiles are hump-shaped. The bankruptcy filing rates peak at age 30-35 for homeowners and at age 45-50 for renters. We construct a lifecycle optimization model that quantitatively matches these data facts. In the model, households are subject to income shocks, house price shocks and taste shocks, and they make bankruptcy decisions along with choices over a risk free asset, housing, mortgage debt and unsecured debt. Two important points are highlighted by the model.

Discussant: T.B.A.

Nitzan Tzur-Ilan (Hebrew University of Jerusalem)

The Effect of Loan-to-Value Limits on the Demand for Housing: The Case of Israel

Abstract: This study examines the effect of a Loan-to Value (LTV) restriction on property purchases of Israeli households. Using a large and novel micro-economic database and a matching technique to compare consumers affected by the regulation with similar consumers who are unaffected, I find that the LTV restriction has a significant effect on households. Consumers affected by the LTV limit take smaller mortgages (are less leveraged), and purchase smaller, cheaper properties, in locations farther away from the major urban centers. I also find that no segment of the population is excluded from the market because of the regulation, in contrast with critiques according to which macro- prudential policies prevent certain segments of the population from obtaining credit. I conclude that an LTV limitation, the most common macro-prudential policy tool, has an impact not only from a financial stability perspective, by reducing the leverage of households, but also on the housing market, by changing the households’ preferences over the characteristics of the acquired asset.

Discussant: Sherman Cheung

Phillippe d’Astous (HEC Montreal)

Consumption, Debt, and Delinquency Responses to an Anticipated Increase in Cash-on-Hand

Abstract: I use account-level bank data to analyze consumers’ response to an anticipated increase in cash-on-hand following the final payment on a term loan. Liquidity constraints are elicited using past payment behavior on the credit card, and can rationalize the response of credit card expenditures and debt. However, contrary to predictions, unconstrained consumers increase their propensity to finance durable goods with a new term loan by 23%, suggesting other behavioral explanations, such as mental accounting, might influence term loan contracting. Default probability decreases, which shows that financial delinquency can be an important margin of adjustment for consumers.

Discussant: Ron Balvers

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