PhD Oral Exam - Jared Buck, Economics

When studying for a doctoral degree (PhD), candidates submit a thesis that provides a critical review of the current state of knowledge of the thesis subject as well as the student’s own contributions to the subject. The distinguishing criterion of doctoral graduate research is a significant and original contribution to knowledge.

Once accepted, the candidate presents the thesis orally. This oral exam is open to the public.

Abstract

Around 20% of households aged 65 simultaneously held mortgage debt while carrying at least 3-months income in low-return liquid assets in 2022, a phenomenon known as the co-holding puzzle. While this appears to violate basic arbitrage, co-holding is actually an important form of self-insurance that cannot be captured in net-worth models. Chapter 1 synthesizes the literature on co-holding that largely focuses on credit cards. Chapter 2 develops a simple theory of co-holding with closed-end loans (debt contracts that work like mortgages), and predicts that co-holding should be more pronounced when future endowments are larger relative to current endowments. Chapter 3 develops a quantitative model to understand co-holding in retirement. Mortgage debt is an important tool for retirees to tap home equity, and while expense risk is the main driver, re-financing costs account for one third of the co-holding share among mortgagors, and access risk amplifies the other mechanisms. Taken together, the thesis shows that holding cash alongside debt is not a mistake: the position is rational because closed-end debt is costly to re-access once paid back. In terms of measuring welfare effects, a model that nets portfolio debt with assets may report the right total, but will get the wrong distribution.