Imperial College London
Portrait Picture

ProfessorTarunRamadorai

Business School

Professor of Financial Economics
 
 
 
//

Contact

 

t.ramadorai CV

 
 
//

Location

 

53 Prince's GateSouth Kensington Campus

//

Summary

 

Publications

Citation

BibTex format

@article{Badarinza:2018:10.1287/mnsc.2016.2629,
author = {Badarinza, C and Campbell, JY and Ramadorai, T},
doi = {10.1287/mnsc.2016.2629},
journal = {Management Science},
pages = {2275--2288},
title = {What calls to ARMs? International evidence on interest rates and the choice of Adjustable-Rate Mortgages},
url = {http://dx.doi.org/10.1287/mnsc.2016.2629},
volume = {64},
year = {2018}
}
Download

RIS format (EndNote, RefMan)

TY  - JOUR
AB  - The relative popularity of adjustable-rate mortgages (ARMs) and fixed-rate mortgages (FRMs) varies considerably both across countries and over time. We ask how movements in current and expected future interest rates affect the share of ARMs in total mortgage issuance. Using a nine-country panel and instrumental variables methods, we present evidence that near-term (one-year) rational forecasts of future movements in ARM rates do affect mortgage choice, particularly in more recent data since 2001. However, longer-term (three-year) rational forecasts of ARM rates have a relatively weak effect, and the current spread between FRM and ARM rates also matters, suggesting that households are concerned with current interest costs as well as with lifetime cost minimization. These conclusions are robust to alternative (adaptive and survey-based) models of household expectations.
AU  - Badarinza,C
AU  - Campbell,JY
AU  - Ramadorai,T
DO  - 10.1287/mnsc.2016.2629
EP  - 2288
PY  - 2018///
SN  - 0025-1909
SP  - 2275
TI  - What calls to ARMs? International evidence on interest rates and the choice of Adjustable-Rate Mortgages
T2  - Management Science
UR  - http://dx.doi.org/10.1287/mnsc.2016.2629
UR  - http://gateway.webofknowledge.com/gateway/Gateway.cgi?GWVersion=2&SrcApp=PARTNER_APP&SrcAuth=LinksAMR&KeyUT=WOS:000439102900017&DestLinkType=FullRecord&DestApp=ALL_WOS&UsrCustomerID=1ba7043ffcc86c417c072aa74d649202
UR  - https://pubsonline.informs.org/doi/10.1287/mnsc.2016.2629
UR  - http://hdl.handle.net/10044/1/64698
VL  - 64
ER  -
Download