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Faculty News December 21, 2021

Office Hours with Motohiro Yogo

Office Hours with Motohiro YogoThough the students in this semester’s Financial Investments class might not know it, their professor once sat exactly where they did: Motohiro Yogo, who joined Princeton’s faculty in 2015, is himself an undergraduate alumnus of the university. 

During his time as an economics major, Yogo got to work closely with some of the best minds in the field–an experience he says motivated him to pursue a career in economics himself.

“I wrote my senior thesis with Michael Woodford, who is now at Columbia,” he said. “Back then, I did not realize that he is a world-renowned macroeconomist. Now that I realize who he is, I am grateful that he spent so much time with me!” 

Before graduating from Princeton, Yogo also served as a research assistant to Princeton SPIA Professor Anne Case.

“I was fortunate to have a front-row view of Anne and Angus Deaton at work. I admire their ability to identify important economic questions and their enthusiasm for digging deep into data. That experience convinced me to go to economics graduate school.”

This experience as a student at Princeton isn’t unusual, Yogo says, noting that the university’s commitment to undergraduate education is what sets it apart. 

“Faculty advising of junior independent work and senior theses are unique to Princeton,” he said. “In both teaching and advising, it gives me great satisfaction when a student’s face lights up when a difficult concept suddenly clicks.”

Using big data research to teach personal finance

In Yogo’s Financial Investments course, students explore a range of topics relevant to personal finance, including borrowing through mortgages and loans, tax efficient saving, and saving in stocks, bonds, mutual funds, and life insurance. 

As one of the country’s leading experts on asset pricing and insurance, the course is informed by Yogo’s decades of research on how financial asset prices are determined and how both households and insurers are affected by regulatory and financial frictions.

In a paper published in the Journal of Political Economy, Yogo and his co-author Ralph Koijen develop a new methodology–called demand system asset pricing–that uses portfolio holdings data to help researchers study questions like: Which institutional investors care about socially responsible investing? How do large-scale asset purchases by the Fed or the ECB affect asset prices? Which countries have large holdings of U.S. Treasury bonds, and how does their demand affect Treasury yields?

In another recent paper, Yogo, Princeton’s Natalie Cox, and Andrew Whitten of the U.S. Treasury analyze millions of tax returns to show that participation in retirement plans is declining among low-income households. Looking at retirement plan contributions by zip code, the researchers show that average income is a major predictor of plan participation and argue that, by requiring employers to provide access to a plan, the U.S. could boost participation among those in the lowest income quintile by 17% after 10 years.

Highlighted Research
A Demand System Approach to Asset Pricing
with Ralph S. J. Koijen
Financial Inclusion Across the United States
with Natalie Cox and Andrew Whitten

By using big data to inform his teaching of topics in personal finance, Yogo hopes to show his students that economics, as a discipline and framework, can inform how they approach a wide range of challenges in both their personal and professional lives.

“Economics teaches you how to understand the world through empirical methods and mathematical modeling. Our emphasis on cause and effect, rather than just correlations or forecasts, gives students unique and valuable training. These methods are applicable in many fields including private enterprise, nonprofit organizations, and government.”

A small town with big city diversity

If you’re looking for Professor Yogo outside the classroom, you might find him at Springdale Golf Club, where he’s been playing since his time on Princeton’s varsity golf team. 

Twenty years later, he’s still proud to call Princeton home. 

“Both at the university and in the town, you meet people from all over the world. Although it is a small town, it does not feel that way because of the diversity of people that you encounter. I’m foreign born, but I don’t feel like a foreigner here.”

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