Essays in economic and financial decisions of households

This dissertation is a collection of three independent chapters that aim to improve our understanding of economic behavior of households. I will focus on two important areas where households make investment decisions, namely in financial markets and obtaining education. The first chapter examines how the provision of student loans affects the saving behavior and portfolio choices of parents. I show that higher levels of expected student aid increase the parental saving rate and shift the allocation of wealth towards riskier assets. The mechanism behind this result is that parents anticipate that the student aid expansion increases the probability their children will attend college. The second chapter identifies the channel through which credit provision can fuel stock prices. Our findings are consistent with an extrapolation channel. We show that investors that borrow are more likely to buy following high returns, subscribe to overvalued new equity issues and incur large trading losses. In the third chapter I demonstrate that marriage prospects increase investments in female schooling in developing countries. An expansion of matrimonial property increases the intra-household decision making power of women, this shift provides incentives to increase investments in female education.