Asset Status Proxies and Consumer Preference for ARMs: An Empirical Investigation Using Probit Analysis
This study investigates whether consideration of proxies for borrower asset status can contribute to understanding of consumer FRM vs. ARM mortgage choice behavior. In the context of probit analysis, it is found that considerations of asset status proxies significantly improves statistical models of the mortgage choice situation. There are strong empirical indications that the ARM preferences of low-asset borrowers are more strongly influenced by the general level of interest rates than are the ARM preferences of high-asset borrowers. The empirical results also indicate that high-asset borrowers are more sensitive to the FRM-ARM interest rate differential than are low-asset borrowers.
Volume (Year): 3 (1988)
Issue (Month): 1 ()
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