Imperial College London
Dr Harjoat Bhamra

DrHarjoatBhamra

Business School

Associate Professor of Finance
 
 
 
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Contact

 

+44 (0)20 7594 9077h.bhamra CV

 
 
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Location

 

Office 4.03, 53 Prince's GateBusiness School BuildingSouth Kensington Campus

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Summary

 

Publications

Citation

BibTex format

@article{Bhamra:2019:10.1257/aer.20161076,
author = {Bhamra, HS and Uppal, R},
doi = {10.1257/aer.20161076},
journal = {American Economic Review},
pages = {1116--1154},
title = {Does household finance matter? Small financial errors with large social costs},
url = {http://dx.doi.org/10.1257/aer.20161076},
volume = {109},
year = {2019}
}
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RIS format (EndNote, RefMan)

TY  - JOUR
AB  - Households with familiarity biases tilt their portfolios toward a few risky assets. The resulting mean-variance loss from portfolio underdiversification is equivalent to only a modest reduction of about 1 percent per year in a household's portfolio return. However, once we consider also the effect of familiarity biases on the asset-allocation and intertemporal consumption-savings decisions, the welfare loss is multiplied by a factor of four. In general equilibrium, the suboptimal decisions of households distort also aggregate growth, amplifying further the overall social welfare loss. Our findings demonstrate that financial markets are not a mere sideshow to the real economy and that improving the financial decisions of households can lead to large benefits, not just for individual households, but also for society.
AU  - Bhamra,HS
AU  - Uppal,R
DO  - 10.1257/aer.20161076
EP  - 1154
PY  - 2019///
SN  - 0002-8282
SP  - 1116
TI  - Does household finance matter? Small financial errors with large social costs
T2  - American Economic Review
UR  - http://dx.doi.org/10.1257/aer.20161076
UR  - http://hdl.handle.net/10044/1/64753
VL  - 109
ER  -
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