About

Johan Walden is a Professor of Finance at the University of California at Berkeley, Haas School of Business. He holds the Mitsubishi Bank Chair in International Business and Finance. Walden's research focuses on international finance, corporate finance, and empirical asset pricing.

Research topics

• Business
• Economics
• Finance
• Financial system
• Marketing
• Microeconomics
• Monetary economics

Selected publications

• Presentation Slides for "Visibility Bias in the Transmission of Consumption Beliefs and Undersaving"

  SSRN Electronic Journal · 2024-01-01

  articleOpen accessSenior author
  PublisherDOI

• Model Selection by Market Selection

  SSRN Electronic Journal · 2023-01-01

  articleOpen accessSenior author
  PublisherDOI

• On efficiency in disagreement economies

  Social Choice and Welfare · 2023-07-07

  articleOpen accessSenior author

  Abstract We analyze multiple-beliefs based efficiency measures in economies with risk and disagreement, including belief neutral efficiency and inefficiency, incomplete knowledge efficiency, efficiency based on unanimity, and utility aggregators that minimize Bergson welfare functions over multiple beliefs. We provide equivalence results under technical conditions that are satisfied in several work-horse economies, including the exchange economy and a standard economy with a linear production technology. We also provide several examples for which these measures differ. Our results show that the further away one gets from the standard exchange economy, the more the different multiple-beliefs based measures differ in the allocations they identify as efficient, in general. Consequently, the more important the choice of efficiency measure becomes.

  PublisherOA PDFDOI

• Visibility Bias in the Transmission of Consumption Beliefs and Undersaving

  The Journal of Finance · 2023-03-21 · 12 citations

  articleOpen accessSenior author

  ABSTRACT We model visibility bias in the social transmission of consumption behavior. When consumption is more salient than nonconsumption, people perceive that others are consuming heavily, and infer that future prospects are favorable. This increases aggregate consumption in a positive feedback loop. A distinctive implication is that disclosure policy interventions can ameliorate undersaving. In contrast with wealth‐signaling models, information asymmetry about wealth reduces overconsumption. The model predicts that saving is influenced by social connectedness, observation biases, and demographic structure, and provides new insight into savings rates. These predictions are distinct from other common models of consumption distortions.

  PublisherOA PDFDOI

• Payment System Externalities

  The Journal of Finance · 2022 · 27 citations

  Senior authorCorresponding
  • Business
  • Monetary economics
  • Economics

  ABSTRACT We examine how the payment processing role of banks affects their lending activity. In our model, banks operate in separate zones, and issue claims to entrepreneurs who purchase some inputs outside their own zone. Settling bank claims across zones incurs a cost. In equilibrium, a liquidity externality arises when zones are sufficiently different in their outsourcing propensities—a bank may restrict its own lending because it needs to hold liquidity against claims issued by another bank. Our work highlights that the disparate motives for interbank borrowing (investing in productive projects and managing liquidity) can have different effects on efficiency.

  PublisherDOI

• Psychological Distance and Subjective Beliefs

  SSRN Electronic Journal · 2022-01-01 · 1 citations

  articleOpen accessSenior author
  PublisherDOI

• Nonbanks and Mortgage Securitization

  Annual Review of Financial Economics · 2022 · 25 citations

  • Business
  • Financial system
  • Finance

  This article reviews the dramatic growth of nonbank mortgage lending after the Global Financial Crisis, especially to borrowers with lower credit scores, and the related importance of mortgage-backed securitization. Our literature review suggests that the existing theoretical and empirical work on securitization is more relevant to bank than to nonbank lenders, thus leaving outstanding questions as to why nonbank market shares have increased to their current levels and how best to structure nonbank oversight. To highlight key differences in the mortgage-lending incentives of banks and nonbanks, we build a simple theoretical model of bank versus nonbank mortgage lending and use it to generate and test empirical hypotheses. We find, in particular, that loans issued by nonbanks are more likely to prepay early than loans issued by banks, the difference not explainable by nonbank borrowers prepaying more rationally. Using regulatory filings from nonbanks that are typically unavailable to academic researchers, we examine the balance sheets and liquidity and capital positions of large Ginnie Mae nonbank servicers, which face and pose more risk in the current mortgage system. We find that on average these servicers have reasonable liquidity and capital positions relative to standard regulatory thresholds, particularly in 2022:Q1 after a few quarters of elevated profits. However, some large Ginnie Mae servicers appear to have inadequate capital, as gauged by risk-based capital measures. If defaults rise on a large scale, the liquidity and capital positions of these servicers may amplify the disruption in the mortgage and housing markets.

  PublisherOA PDFDOI

• Distortions and Efficiency in Production Economies with Heterogeneous Beliefs

  Review of Financial Studies · 2021-06-08 · 14 citations

  articleSenior author

  Abstract We study consumption, savings, and asset prices in economies with disagreement and production, focusing on settings with real effects of disagreement. Aggregate savings may be significantly distorted under disagreement, possibly related to the undersaving puzzle. In the production economy, mispricing mainly manifests itself in idiosyncratic risk, in contrast to the exchange economy, where the risk-free rate and expected return on the market may be distorted. Potential policy implications include the introduction of investment taxes or subsidies. Our results highlight the real effects of disagreement in financial markets, and the differences between economies with and without production.

  PublisherDOI

• Numerical Ross Recovery for Diffusion Processes Using a PDE Approach

  Applied Mathematical Finance · 2020-03-03 · 2 citations

  articleOpen accessSenior author

  We develop and analyse a numerical method for solving the Ross recovery problem for a diffusion problem with unbounded support, with a transition independent pricing kernel. Asset prices are assumed to only be available on a bounded subinterval $$B = [- N, N]$$B=[−N, N]. Theoretical error bounds on the recovered pricing kernel are derived, relating the convergence rate as a function of $$N$$N to the rate of mean reversion of the diffusion process. Our suggested numerical method for finding the pricing kernel employs finite differences, and we apply Sturm–Liouville theory to make use of inverse iteration on the resulting discretized eigenvalue problem. We numerically verify the derived error bounds on a test bench of three model problems.

  PublisherOA PDFDOI

• Visibility Bias in the Transmission of Consumption Beliefs and Undersaving

  National Bureau of Economic Research · 2019-02-01 · 30 citations

  reportOpen accessSenior author

  We model visibility bias in the social transmission of consumption behavior. When consumption is more salient than non-consumption, people perceive that others are consuming heavily, and infer that future prospects are favorable. This increases aggregate consumption in a positive feedback loop. A distinctive implication is that disclosure policy interventions can ameliorate undersaving. In contrast with wealth-signaling models, information asymmetry about wealth reduces overconsumption. The model predicts that saving is influenced by social connectedness, observation biases, and demographic structure; and provides new insight into savings rates. These predictions are distinct from other common models of consumption distortions.

  PublisherOA PDFDOI

Frequent coauthors

• Bing Han

  Sichuan University

  150 shared

• Rustam Ibragimov

  Imperial College London

  26 shared

• Christine A. Parlour

  24 shared

• Dwight M. Jaffee

  20 shared

• David Hirshleifer

  University of Southern California

  18 shared

• Richard Stanton

  University of California, Berkeley

  14 shared

• Christian Heyerdahl-Larsen

  BI Norwegian Business School

  10 shared

• Marat Ibragimov

  New Economic School

  8 shared

Education

• Ph.D., Finance

  University of California at Berkeley

  1990

• M.S., Finance

  University of California at Berkeley

  1986

• B.A., Economics

  University of California at Berkeley

  1983

Awards & honors

• Mitsubishi Bank Chair in International Business and Finance