The Journal of Finance

Optimal Portfolio Choice for Long‐Horizon Investors with Nontradable Labor Income

Published: 4/2001,  Volume: 56,  Issue: 2  |  DOI: 10.1111/0022-1082.00333  |  Cited by: 519

Luis M. Viceira

This paper examines how risky labor income and retirement affect optimal portfolio choice. With idiosyncratic labor income risk, the optimal allocation to stocks is unambiguously larger for employed investors than for retired investors, consistent with the typical recommendations of investment advisors. Increasing idiosyncratic labor income risk raises investors' willingness to save and reduces their stock portfolio allocation towards the level of retired investors. Positive correlation between labor income and stock returns has a further negative effect and can actually reduce stockholdings below the level of retired investors.

Global Currency Hedging

Published: 1/13/2010,  Volume: 65,  Issue: 1  |  DOI: 10.1111/j.1540-6261.2009.01524.x  |  Cited by: 221

JOHN Y. CAMPBELL, KARINE SERFATY‐DE MEDEIROS, LUIS M. VICEIRA

Over the period 1975 to 2005, the U.S. dollar (particularly in relation to the Canadian dollar), the euro, and the Swiss franc (particularly in the second half of the period) moved against world equity markets. Thus, these currencies should be attractive to risk‐minimizing global equity investors despite their low average returns. The risk‐minimizing currency strategy for a global bond investor is close to a full currency hedge, with a modest long position in the U.S. dollar. There is little evidence that risk‐minimizing investors should adjust their currency positions in response to movements in interest differentials.

Empirical Evidence on Capital Investment, Growth Options, and Security Returns

Published: 1/20/2006,  Volume: 61,  Issue: 1  |  DOI: 10.1111/j.1540-6261.2006.00833.x  |  Cited by: 291

CHRISTOPHER W. ANDERSON, LUIS GARCIA‐FEIJÓO

Financial Regulation, Financial Globalization, and the Synchronization of Economic Activity

Published: 5/20/2013,  Volume: 68,  Issue: 3  |  DOI: 10.1111/jofi.12025  |  Cited by: 255

SEBNEM KALEMLI‐OZCAN, ELIAS PAPAIOANNOU, JOSÉ‐LUIS PEYDRÓ

We analyze the impact of financial globalization on business cycle synchronization using a proprietary database on banks’ international exposure for industrialized countries during 1978 to 2006. Theory makes ambiguous predictions and identification has been elusive due to lack of bilateral time‐varying financial linkages data. In contrast to conventional wisdom and previous empirical studies, we identify a strong negative effect of banking integration on output synchronization, conditional on global shocks and country‐pair heterogeneity. Similarly, we show divergent economic activity due to higher integration using an exogenous de‐jure measure of integration based on financial regulations that harmonized EU markets.

Marketwide Private Information in Stocks: Forecasting Currency Returns

Published: 9/10/2008,  Volume: 63,  Issue: 5  |  DOI: 10.1111/j.1540-6261.2008.01398.x  |  Cited by: 50

RUI ALBUQUERQUE, EVA DE FRANCISCO, LUIS B. MARQUES

We present a model of equity trading with informed and uninformed investors where informed investors trade on firm‐specific and marketwide private information. The model is used to identify the component of order flow due to marketwide private information. Estimated trades driven by marketwide private information display little or no correlation with the first principal component in order flow. Indeed, we find that co‐movement in order flow captures variation mostly in liquidity trades. Marketwide private information obtained from equity market data forecasts industry stock returns, and also currency returns.

Monetary Policy, Inflation, and Crises: Evidence from History and Administrative Data

Published: 1/27/2026,  Volume: 81,  Issue: 2  |  DOI: 10.1111/jofi.70023  |  Cited by: 5

GABRIEL JIMÉNEZ, DMITRY KUVSHINOV, JOSÉ‐LUIS PEYDRÓ, BJÖRN RICHTER

We show that a U‐shaped monetary rate path increases banking crisis risk, via credit and asset price cycles, analyzing 17 countries over 150 years. Rate hikes (raw or instrumented) increase crisis risk, but only if preceded by prolonged cuts. These patterns are unique to banking crises, unlike noncrisis recessions. Regarding the mechanism, prolonged cuts raise the likelihood of large credit and asset price booms, consistent with higher credit supply and risk‐taking. Subsequent hikes strongly reduce credit and asset prices, and increase banks' realized credit risk, rather than interest rate risk. We find consistent results in administrative loan‐level data for Spain.

Monetary Policy and Inequality

Published: 7/27/2023,  Volume: 78,  Issue: 5  |  DOI: 10.1111/jofi.13262  |  Cited by: 73

ASGER LAU ANDERSEN, NIELS JOHANNESEN, MIA JØRGENSEN, JOSÉ‐LUIS PEYDRÓ

We analyze the distributional effects of monetary policy on income, wealth, and consumption. We use administrative household‐level data covering the entire population in Denmark over the period 1987 to 2014 and exploit a long‐standing currency peg as a source of exogenous variation in monetary policy. We find that gains from softer monetary policy in terms of income, wealth, and consumption are monotonically increasing in ex ante income. The distributional effects reflect systematic differences in exposure to the various channels of monetary policy, especially nonlabor channels (e.g., leverage and risky assets). Our estimates imply that softer monetary policy increases income inequality.

Hedger of Last Resort: Evidence from Brazilian FX Interventions, Local Credit, and Global Financial Cycles

Published: 5/22/2026,  Volume: 81,  Issue: 4  |  DOI: 10.1111/jofi.70054  |  Cited by: 0

RODRIGO BARBONE GONZALEZ, DMITRY KHAMETSHIN, JOSÉ‐LUIS PEYDRÓ, ANDREA POLO

We show that FX interventions can be effective, particularly in attenuating global financial spillovers. We exploit global financial shocks and Brazilian central bank interventions in FX derivatives using three matched administrative registers: bank credit (to firms), foreign credit to banks, and employer‐employees. After the U.S. Taper Tantrum (followed by emerging markets' FX turbulence), Brazilian banks with more foreign debt cut credit supply, reducing firm‐level employment. A subsequent large policy intervention supplying derivatives against FX risks — hedger of last resort — halved the negative effects. A 2008 to 2015 panel exploiting global FX shocks and local FX interventions confirms the results and the hedging channel. However, the FX policy entails fiscal and moral hazard costs.

Financial Crises and Political Radicalization: How Failing Banks Paved Hitler's Path to Power

Published: 7/8/2022,  Volume: 77,  Issue: 6  |  DOI: 10.1111/jofi.13166  |  Cited by: 37

SEBASTIAN DOERR, STEFAN GISSLER, JOSÉ‐LUIS PEYDRÓ, HANS‐JOACHIM VOTH

Do financial crises radicalize voters? We study Germany's 1931 banking crisis, collecting new data on bank branches and firm‐bank connections. Exploiting cross‐sectional variation in precrisis exposure to the bank at the center of the crisis, we show that Nazi votes surged in locations more affected by its failure. Radicalization in response to the shock was exacerbated in cities with a history of anti‐Semitism. After the Nazis seized power, both pogroms and deportations were more frequent in places affected by the banking crisis. Our results suggest an important synergy between financial distress and cultural predispositions, with far‐reaching consequences.

The International Bank Lending Channel of Monetary Policy Rates and QE: Credit Supply, Reach‐for‐Yield, and Real Effects

Published: 1/25/2019,  Volume: 74,  Issue: 1  |  DOI: 10.1111/jofi.12735  |  Cited by: 212

BERNARDO MORAIS, JOSÉ‐LUIS PEYDRÓ, JESSICA ROLDÁN‐PEÑA, CLAUDIA RUIZ‐ORTEGA

We identify the international credit channel by exploiting Mexican supervisory data sets and foreign monetary policy shocks in a country with a large presence of European and U.S. banks. A softening of foreign monetary policy expands credit supply of foreign banks (e.g., U.K. policy affects credit supply in Mexico via U.K. banks), inducing strong firm‐level real effects. Results support an international risk‐taking channel and spillovers of core countries’ monetary policies to emerging markets, both in the foreign monetary softening part (with higher credit and liquidity risk‐taking by foreign banks) and in the tightening part (with negative local firm‐level real effects).