Essays in asset price bubbles

This thesis studies the field of asset price bubbles. It is comprised of three independent chapters. Each of these chapters either directly or indirectly analyse the existence or implications of asset price bubbles. The type of bubbles assumed in each of these chapters is consistent with rational expectations. Thus, the kind of price bubbles investigated here are known as rational bubbles in the literature. The following describes the three chapters. Chapter 1: This chapter attempts to explain the recent US housing price bubble by developing a heterogeneous agent endowment economy asset pricing model with risky housing, endogenous collateral and defaults. Investment in housing is subject to an idiosyncratic risk and some mortgages are defaulted in equilibrium. We analytically derive the leverage or the endogenous loan to value ratio. This variable comes from a limited participation constraint in a one period mortgage contract with monitoring costs. Our results show that low values of housing investment risk produces a credit easing effect encouraging excess leverage and generates credit driven rational price bubbles in the housing good. Conversely, high values of housing investment risk produces a credit crunch characterized by tight borrowing constraints, low leverage and low house prices. Furthermore, the leverage ratio was found to be procyclical and the rate of defaults countercyclical consistent with empirical evidence. Chapter 2: It is widely believed that financial assets have considerable persistence and are susceptible to bubbles. However, identification of this persistence and potential bubbles is not straightforward. This chapter tests for price bubbles in the United States housing market accounting for long memory and structural breaks. The intuition is that the presence of long memory negates price bubbles while the presence of breaks could artificially induce bubble behaviour. Hence, we use procedures namely semi-parametric Whittle and parametric ARFIMA procedures that are consistent for a variety of residual biases to estimate the value of the long memory parameter, d, of the log rent-price ratio. We find that the semi-parametric estimation procedures robust to non-normality and heteroskedasticity errors found far more bubble regions than parametric ones. A structural break was identified in the mean and trend of all the series which when accounted for removed bubble behaviour in a number of regions. Importantly, the United States housing market showed evidence for rational bubbles at both the aggregate and regional levels. In the third and final chapter, we attempt to answer the following question: To what extend should individuals participate in the stock market and hold risky assets over their lifecycle? We answer this question by employing a lifecycle consumption-portfolio choice model with housing, labour income and time varying predictable returns where the agents are constrained in the level of their borrowing. We first analytically characterize and then numerically solve for the optimal asset allocation on the risky asset comparing the return predictability case with that of IID returns. We successfully resolve the puzzles and find equity holding and participation rates close to the data. We also find that return predictability substantially alter both the level of risky portfolio allocation and the rate of stock market participation. High factor (dividend-price ratio) realization and high persistence of factor process indicative of stock market bubbles raise the amount of wealth invested in risky assets and the level of stock market participation, respectively. Conversely, rare disasters were found to bring down these rates, the change being severe for investors in the later years of the life-cycle. Furthermore, investors following time varying returns (return predictability) hedged background risks significantly better than the IID ones.

How Long the Night : A Novel ; followed by an essay ‘The Ghosts of Muranów: Confronting Poland’s Jewish Past’

My novel, 'How Long the Night,' and my essay, ‘The Ghosts of Muranów: Confronting Poland’s Jewish Past,’ focus on the relationship between urban space, memory and identity. Before the Second World War Muranów was one of the largest Jewish districts in Europe. In August 1939 Poland’s capital was home to 380,000 Jews, which accounted for about 30 percent of the city’s total population. During the war the district was the central part of the Warsaw Ghetto located near the Umschlagplatz, the place from which Jews were transported to concentration camps. After the failed uprising in 1943 the Nazis burnt the entire quarter to the ground. There was nothing left, except for heaps of rubble. The debris was to be the foundation on which the new socialist realist residential district would stand. The new Muranów, erected on the ashes of the former ghetto, is a space of absence, emptiness and repressed guilt. There are no physical traces of the Jewish presence in the area, except for commemorative plaques, monuments or obelisks. Former tenement houses, shops, synagogues are gone; street names and their layout are different as well. Nevertheless, the former Jewish district is present in images, dreams (or nightmares), in fantasies, memories and stories. My novel and my essay explore the connection between place, history, memory and trauma. The space of Muranów becomes a symbolic trigger for investigation and re-examination of the forgotten or suppressed past. What is more, the novel examines the way a foreign language serves as a tool through which painful and repressed stories can be (re)told.

Investigating assistive technology to support memory for people with cognitive impairments

Technologies such as automobiles or mobile phones allow us to perform beyond our physical capabilities and travel faster or communicate over long distances. Technologies such as computers and calculators can also help us perform beyond our mental capabilities by storing and manipulating information that we would be unable to process or remember. In recent years there has been a growing interest in assistive technology for cognition (ATC) which can help people compensate for cognitive impairments. The aim of this thesis was to investigate ATC for memory to help people with memory difficulties which impacts independent functioning during everyday life. Chapter one argues that using both neuropsychological and human computing interaction theory and approaches is crucial when developing and researching ATC. Chapter two describes a systematic review and meta-analysis of studies which tested technology to aid memory for groups with ABI, stroke or degenerative disease. Good evidence was found supporting the efficacy of prompting devices which remind the user about a future intention at a set time. Chapter three looks at the prevalence of technologies and memory aids in current use by people with ABI and dementia and the factors that predicted this use. Pre-morbid use of technology, current use of non-tech aids and strategies and age (ABI group only) were the best predictors of this use. Based on the results, chapter four focuses on mobile phone based reminders for people with ABI. Focus groups were held with people with memory impairments after ABI and ABI caregivers (N=12) which discussed the barriers to uptake of mobile phone based reminding. Thematic analysis revealed six key themes that impact uptake of reminder apps; Perceived Need, Social Acceptability, Experience/Expectation, Desired Content and Functions, Cognitive Accessibility and Sensory/Motor Accessibility. The Perceived need theme described the difficulties with insight, motivation and memory which can prevent people from initially setting reminders on a smartphone. Chapter five investigates the efficacy and acceptability of unsolicited prompts (UPs) from a smartphone app (ForgetMeNot) to encourage people with ABI to set reminders. A single-case experimental design study evaluated use of the app over four weeks by three people with severe ABI living in a post-acute rehabilitation hospital. When six UPs were presented through the day from ForgetMeNot, daily reminder-setting and daily memory task completion increased compared to when using the app without the UPs. Chapter six investigates another barrier from chapter 4 – cognitive and sensory accessibility. A study is reported which shows that an app with ‘decision tree’ interface design (ApplTree) leads to more accurate reminder setting performance with no compromise of speed or independence (amount of guidance required) for people with ABI (n=14) compared to a calendar based interface. Chapter seven investigates the efficacy of a wearable reminding device (smartwatch) as a tool for delivering reminders set on a smartphone. Four community dwelling participants with memory difficulties following ABI were included in an ABA single case experimental design study. Three of the participants successfully used the smartwatch throughout the intervention weeks and these participants gave positive usability ratings. Two participants showed improved memory performance when using the smartwatch and all participants had marked decline in memory performance when the technology was removed. Chapter eight is a discussion which highlights the implications of these results for clinicians, researchers and designers.