An Empirical Study of the Credit Market with Unobserved Consumer Typers / Li Gan, Roberto Mosquera.

Format:

Book

Author/Creator:

Gan, Li.

Contributor:

National Bureau of Economic Research.

Mosquera, Roberto.

Series:

Working Paper Series (National Bureau of Economic Research) no. w13873.

NBER working paper series no. w13873

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2008.

Summary:

This paper proposes an econometric model to identify unobserved consumer types in the credit market. Consumers choose different amounts of loan because of differences in their time or risk preferences (types). Thus, the unconditional probability of default is modeled using a mixture density combining a type-conditioning default variable with a type-determining random variable. The model is estimated using individual-level consumer credit card information. The parameter estimates and statistical tests support this kind of specification. Furthermore, the model produces better out-of-sample predictions on the probability of default than traditional models; hence, it provides evidence of the existence of types in the consumer credit market.

Notes:

Print version record

March 2008.