Household finance and the financial decision-making process

Financial economists have long studied how corporations utilize financial instruments, yet relatively little is understood about how consumers and house-holds utilize various credit alternatives in managing their consumption and savings objectives. However, with increasing interest in issues surrounding household behavioral finance, research into household financial decision-making processes is becoming increasingly important. For example, at the 2006 American Finance Association Presidential Address, Professor John Campbell raised a number of critical insights toward our understanding household participation and diversification decisions in the financial markets, as well as their mortgage refinancing decisions. However, Professor Campbell admittedly neglected many other important issues related to households’ choice of credit, use or repayment of credit card debt, payday lending, and other relevant issues related to household credits.