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Institute
INDIVIDUAL INVESTORS ARE REPEATEDLY FOUND TO UNDERPERFORM RELATIVE TO A MARKET INDEX. BESIDES EXCESSIVE TRADING, LITTLE IS KNOWN WHEN RETAIL INVESTORS COLLECTIVELY LOSE. THIS ARTICLE SHOWS THAT TRADING IN SHORT-SELLING CONSTRAINED, VOLATILE STOCKS AROUND EARNINGS ANNOUNCEMENTS IS COSTLY TO INDIVIDUAL INVESTORS. THE EFFECT IS PARTICULARLY PRONOUNCED FOR LESS SOPHISTICATED INVESTORS.
RECENTLY, PASSIVE ETFS AND INDEX FUNDS HAVE BECOME POPULAR AMONG INDIVIDUAL INVESTORS. IN OUR STUDY, WE INVESTIGATE WHETHER INDIVIDUAL INVESTORS BENEFIT FROM USING THEM. WITH DATA FROM ONE OF THE LARGEST BROKERAGES IN GERMANY, WE FIND THAT INDIVIDUAL INVESTORS WORSEN THEIR PORTFOLIO PERFORMANCE AFTER USING THESE PRODUCTS IN COMPARISON TO NON-USERS. SINCE THESE SECURITIES MAKE MARKET TIMING EASIER, FURTHER ANALYSIS REVEALS THAT THE DECREASE IN USERS’ PORTFOLIO PERFORMANCE IS PRIMARILY DUE TO BAD MARKET TIMING.
WE DECOMPOSE INDIVIDUAL INVESTORS’ PORTFOLIO RETURNS INTO PASSIVE BENCHMARK RETURNS, ACTIVE SECURITY SELECTION RETURNS, AND ACTIVE MARKET TIMING RETURNS. FOR THE AVERAGE INVESTOR IN OUR SAMPLE, PASSIVE BENCHMARK RETURNS EXPLAIN SOME 40% OF VARIATION IN LONGITUDINAL PORTFOLIO RETURNS, SECURITY SELECTION EXPLAINS AN ADDITIONAL 50%, AND MARKET TIMING PLAYS ONLY A MINOR ROLE. THIS STANDS IN STARK CONTRAST TO EARLIER RESULTS ON INSTITUTIONAL INVESTORS WHERE PASSIVE BENCHMARK RETURNS (REFLECTING DIFFERENT ASSET ALLOCATION STRATEGIES) EXPLAIN OVER 90%. THE PREDOMINANCE OF SECURITY SELECTION COMES AT A COST FOR INDIVIDUAL INVESTORS: INVESTORS FROM THE HIGHEST QUINTILE IN TERMS OF SECURITY SELECTION ACTIVITY UNDERPERFORM THEIR PEERS FROM THE LOWEST QUINTILE BY MORE THAN 10 PERCENTAGE POINTS PER YEAR. TRANSACTION COSTS EXPLAIN ONLY PART OF THIS UNDERPERFORMANCE. THE LESS INVESTORS DIVERSIFY, THE WORSE THEY DO.
Microeconomic modeling of investors behavior in financial markets and its results crucially depends on assumptions about the mathematical shape of the underlying preference functions as well as their parameterizations. With the purpose to shed some light on the question, which preferences towards risky financial outcomes prevail in stock markets, we adopted and applied a maximum likelihood approach from the field of experimental economics on a randomly selected dataset of 656 private investors of a large German discount brokerage firm. According to our analysis we find evidence that the majority of these clients follow trading pattern in accordance with Prospect Theory (Kahneman and Tversky (1979)). We also find that observable sociodemographic and personal characteristics such as gender or age don't seem to correlate with specific preference types. With respect to the overall impact of preferences on trading behavior, we find a moderate impact of preferences on trading decisions of individual investors. A classification of investors according to various utility types reveals that the strength of the impact of preferences on an investors' rading behavior is not connected to most personal characteristics, but seems to be related to round-trip length.
Shortcomings revealed by experimental and theoretical researchers such as Allais (1953), Rabin (2000) and Rabin and Thaler (2001) that put the classical expected utility paradigm von Neumann and Morgenstern (1947) into question, led to the proposition of alternative and generalized utility functions, that intend to improve descriptive accuracy. The perhaps best known among those alternative preference theories, that has attracted much popularity among economists, is the so called Prospect Theory by Kahneman and Tversky (1979) and Tversky and Kahneman (1992). Its distinctive features, governed by its set of risk parameters such as risk sensitivity, loss aversion and decision weights, stimulated a series of economic and financial models that build on the previously estimated parameter values by Tversky and Kahneman (1992) to analyze and explain various empirical phenomena for which expected utility doesn't seem to offer a satisfying rationale. In this paper, after providing a brief overview of the relevant literature, we take a closer look at one of those papers, the trading model of Vlcek and Hens (2011) and analyze its implications on Prospect Theory parameters using an adopted maximum likelihood approach for a dataset of 656 individual investors from a large German discount brokerage firm. We find evidence that investors in our dataset are moderately averse to large losses and display high risk sensitivity, supporting the main assumptions of Prospect Theory.
In a field study with more than 1.500 customers of an online-broker we test what happens when investors receive repeated feedback on their investment success in a monthly securities account report. The reports show investors’ last year’s returns, costs, their current level of risk and their portfolio diversification. We find that receiving a report results in investors trading less, diversifying more and having higher risk-adjusted returns. Results are robust to controlling for potential play money accounts and changes in report designs. We also find that investors who are less likely to subscribe equally benefit from the report.
Introduction: In the time of increasing resistance and paucity of new drug development there is a growing need for strategies to enhance rational use of antibiotics in German and Austrian hospitals. An evidence-based guideline on recommendations for implementation of antibiotic stewardship (ABS) programmes was developed by the German Society for Infectious Diseases in association with the following societies, associations and institutions: German Society of Hospital Pharmacists, German Society for Hygiene and Microbiology, Paul Ehrlich Society for Chemotherapy, The Austrian Association of Hospital Pharmacists, Austrian Society for Infectious Diseases and Tropical Medicine, Austrian Society for Antimicrobial Chemotherapy, Robert Koch Institute.
Materials and methods: A structured literature research was performed in the databases EMBASE, BIOSIS, MEDLINE and The Cochrane Library from January 2006 to November 2010 with an update to April 2012 (MEDLINE and The Cochrane Library). The grading of recommendations in relation to their evidence is according to the AWMF Guidance Manual and Rules for Guideline Development.
Conclusion: The guideline provides the grounds for rational use of antibiotics in hospital to counteract antimicrobial resistance and to improve the quality of care of patients with infections by maximising clinical outcomes while minimising toxicity. Requirements for a successful implementation of ABS programmes as well as core and supplemental ABS strategies are outlined. The German version of the guideline was published by the German Association of the Scientific Medical Societies (AWMF) in December 2013.
ROBO-ADVICE HAS THE POTENTIAL TO DISRUPT THE MARKET FOR FINANCIAL ADVICE. ALGORITHMS ALREADY DELIVER LOW-COST, AUTOMATIC, AND STANDARDIZED INVESTMENT GUIDANCE TO CLIENTS FROM ALL WEALTH LEVELS AND ESPECIALLY TO THOSE PREVIOUSLY EXCLUDED FROM PERSONAL FACE-TO-FACE ADVICE. TODAY’S OFFERINGS CONCENTRATE ON CONVENIENCE AND COMPLEXITY REDUCTION, COUPLED WITH PASSIVE INVESTMENTS. THE NEXT STEP WILL ADVANCE ALGORITHMS TO DELIVER TAILOR-MADE DECISION SUPPORT FOR THE GROWING NUMBER OF SELF-DIRECTED INVESTORS. THIS ARTICLE PRESENTS REAL-LIFE EMPIRICAL RESULTS ON THE INTRODUCTION OF A PORTFOLIO OPTIMIZATION TOOL THAT GUIDES BROKERAGE CLIENTS TOWARDS INDIVIDUAL OPTIMAL PORTFOLIOS.
We use minutes from 17,000 financial advisory sessions and corresponding client portfolio data to study how active client involvement affects advisor recommendations and portfolio outcomes. We find that advisors confronted with acquiescent clients stick to their standards and recommend expensive but well diversified mutual fund portfolios. However, if clients take an active role in the meetings, advisors deviate markedly from their standards, resulting in poorer portfolio diversification and lower Sharpe ratios. Our findings that advisors cater to client requests parallel the phenomenon of doctors prescribing antibiotics to insistent patients even if inappropriate, and imply that pandering diminishes the quality of advice.
Manipulative communications touting stocks are common in capital markets around the world. Although the price distortions created by so-called “pump-and-dump” schemes are well known, little is known about the investors in these frauds. By examining 421 “pump-and-dump” schemes between 2002 and 2015 and a proprietary set of trading records for over 110,000 individual investors from a major German bank, we provide evidence on the participation rate, magnitude of the investments, losses, and the characteristics of the individuals who invest in such schemes. Our evidence suggests that participation is quite common and involves sizable losses, with nearly 6% of active investors participating in at least one “pump-and-dump” and an average loss of nearly 30%. Moreover, we identify several distinct types of investors, some of which should not be viewed as falling prey to these frauds. We also show that portfolio composition and past trading behavior can better explain participation in touted stocks than demographics. Our analysis offers insights into the challenges associated with designing effective investor protection against market manipulation.
Self-control failure is among the major pathologies (Baumeister et al. (1994)) affecting individual investment decisions which has hardly been measurable in empirical research. We use cigarette addiction identified from checking account transactions to proxy for low self-control and compare over 5,000 smokers to 14,000 nonsmokers. Smokers self-directing their investment trade more frequently, exhibit more biases and achieve lower portfolio returns. We also find that smokers, some of which might be aware of their limited levels of self-control, exhibit a higher propensity than nonsmokers to delegate decision making to professional advisors and fund managers. We document that such precommitments work successfully.
INDIVIDUALS WITH LOWER SELF-CONTROL OFTEN FAIL IN STICKING TO THEIR PLANS WHEN FACING STRONG TEMPTATIONS. ARE THEY ALSO PRONE TO EXHIBIT INVESTMENT BIASES AND SHOW A MORE IMPULSIVE TRADING BEHAVIOR WHILE FORFEITING POTENTIAL PERFORMANCE IN A FINANCIAL CONTEXT? WE USE CIGARETTE ADDICTION, IDENTIFIED THROUGH CHECKING ACCOUNT TRANSACTIONS, AS A PROXY FOR LOW SELFCONTROL AND COMPARE THE INVESTMENT BEHAVIOR OF SMOKERS TO THAT OF NONSMOKERS TO ADDRESS THIS QUESTION EMPIRICALLY.
We relate time-varying aggregate ambiguity (V-VSTOXX) to individual investor trading. We use the trading records of more than 100,000 individual investors from a large German online brokerage from March 2010 to December 2015. We find that an increase in ambiguity is associated with increased investor activity. It also leads to a reduction in risk-taking which does not reverse over the following days. When ambiguity is high, the effect of sentiment looms larger. Survey evidence reveals that ambiguity averse investors are more prone to ambiguity shocks. Our results are robust to alternative survey-, newspaper- or market-based ambiguity measures.
Background: Tuberous sclerosis complex (TSC), a multisystem genetic disorder, affects many organs and systems, characterized by benign growths. This German multicenter study estimated the disease-specific costs and cost-driving factors associated with various organ manifestations in TSC patients. Methods: A validated, three-month, retrospective questionnaire was administered to assess the sociodemographic and clinical characteristics, organ manifestations, direct, indirect, out-of-pocket, and nursing care-level costs, completed by caregivers of patients with TSC throughout Germany. Results: The caregivers of 184 patients (mean age 9.8 ± 5.3 years, range 0.7–21.8 years) submitted questionnaires. The reported TSC disease manifestations included epilepsy (92%), skin disorders (86%), structural brain disorders (83%), heart and circulatory system disorders (67%), kidney and urinary tract disorders (53%), and psychiatric disorders (51%). Genetic variations in TSC2 were reported in 46% of patients, whereas 14% were reported in TSC1. Mean total direct health care costs were EUR 4949 [95% confidence interval (95% CI) EUR 4088–5863, median EUR 2062] per patient over three months. Medication costs represented the largest direct cost category (54% of total direct costs, mean EUR 2658), with mechanistic target of rapamycin (mTOR) inhibitors representing the largest share (47%, EUR 2309). The cost of anti-seizure drugs (ASDs) accounted for a mean of only EUR 260 (5%). Inpatient costs (21%, EUR 1027) and ancillary therapy costs (8%, EUR 407) were also important direct cost components. The mean nursing care-level costs were EUR 1163 (95% CI EUR 1027–1314, median EUR 1635) over three months. Total indirect costs totaled a mean of EUR 2813 (95% CI EUR 2221–3394, median EUR 215) for mothers and EUR 372 (95% CI EUR 193–586, median EUR 0) for fathers. Multiple regression analyses revealed polytherapy with two or more ASDs and the use of mTOR inhibitors as independent cost-driving factors of total direct costs. Disability and psychiatric disease were independent cost-driving factors for total indirect costs as well as for nursing care-level costs. Conclusions: This study revealed substantial direct (including medication), nursing care-level, and indirect costs associated with TSC over three months, highlighting the spectrum of organ manifestations and their treatment needs in the German healthcare setting.
Background: The approval of everolimus (EVE) for the treatment of angiomyolipoma (2013), subependymal giant cell astrocytoma (2013) and drug-refractory epilepsy (2017) in patients with tuberous sclerosis complex (TSC) represents the first disease-modifying treatment option available for this rare and complex genetic disorder. Objective: The objective of this study was to analyse the use, efficacy, tolerability and treatment retention of EVE in patients with TSC in Germany from the patient’s perspective. Methods: A structured cross-age survey was conducted at 26 specialised TSC centres in Germany and by the German TSC patient advocacy group between February and July 2019, enrolling children, adolescents and adult patients with TSC. Results: Of 365 participants, 36.7% (n = 134) reported the current or past intake of EVE, including 31.5% (n = 115) who were taking EVE at study entry. The mean EVE dosage was 6.1 ± 2.9 mg/m2 (median: 5.6 mg/m2, range 2.0–15.1 mg/m2) in children and adolescents and 4 ± 2.1 mg/m2 (median: 3.7 mg/m2, range 0.8–10.1 mg/m2) in adult patients. An early diagnosis of TSC, the presence of angiomyolipoma, drug-refractory epilepsy, neuropsychiatric manifestations, subependymal giant cell astrocytoma, cardiac rhabdomyoma and overall multi-organ involvement were associated with the use of EVE as a disease-modifying treatment. The reported efficacy was 64.0% for angiomyolipoma (75% in adult patients), 66.2% for drug-refractory epilepsy, and 54.4% for subependymal giant cell astrocytoma. The overall retention rate for EVE was 85.8%. The retention rates after 12 months of EVE therapy were higher among adults (93.7%) than among children and adolescents (88.7%; 90.5% vs 77.4% after 24 months; 87.3% vs 77.4% after 36 months). Tolerability was acceptable, with 70.9% of patients overall reporting adverse events, including stomatitis (47.0%), acne-like rash (7.7%), increased susceptibility to common infections and lymphoedema (each 6.0%), which were the most frequently reported symptoms. With a total score of 41.7 compared with 36.8 among patients not taking EVE, patients currently being treated with EVE showed an increased Liverpool Adverse Event Profile. Noticeable deviations in the sub-items ‘tiredness’, ‘skin problems’ and ‘mouth/gum problems’, which are likely related to EVE-typical adverse effects, were more frequently reported among patients taking EVE. Conclusions: From the patients’ perspective, EVE is an effective and relatively well-tolerated disease-modifying treatment option for children, adolescents and adults with TSC, associated with a high long-term retention rate that can be individually considered for each patient. Everolimus therapy should ideally be supervised by a centre experienced in the use of mechanistic target of rapamycin inhibitors, and adverse effects should be monitored on a regular basis.
Background & Aims: Acute-on-chronic liver failure (ACLF) is a syndrome associated with organ failure and high short-term mortality. Recently, the role of surgery as a precipitating event for ACLF has been characterised. However, the impact of preoperative transjugular intrahepatic portosystemic shunt (TIPS) placement on ACLF development in patients with cirrhosis undergoing surgery has not been investigated yet.
Methods: A total of 926 patients (363 with cirrhosis undergoing surgery and 563 patients with TIPS) were screened. Forty-five patients with preoperative TIPS (TIPS group) were 1:1 propensity matched to patients without preoperative TIPS (no-TIPS group). The primary endpoint was the development of ACLF within 28 and 90 days after surgery. The secondary endpoint was 1-year mortality. Results were confirmed by a differently 1:2 matched cohort (n = 176).
Results: Patients in the no-TIPS group had significantly higher rates of ACLF within 28 days (29 vs. 9%; p = 0.016) and 90 days (33 vs. 13%; p = 0.020) after surgery as well as significantly higher 1-year mortality (38 vs. 18%; p = 0.023) compared with those in the TIPS group. Surgery without preoperative TIPS and Chronic Liver Failure Consortium–Acute Decompensation (CLIF-C AD) score were independent predictors for 28- and 90-day ACLF development and 1-year mortality after surgery, especially in patients undergoing visceral surgery. In the no-TIPS group, a CLIF-C AD score of >45 could be identified as cut-off for patients at risk for postoperative ACLF development benefiting from TIPS.
Conclusions: This study suggests that preoperative TIPS may result in lower rates of postoperative ACLF development especially in patients undergoing visceral surgery and with a CLIF-C AD score above 45.
Lay summary: Acute-on-chronic liver failure (ACLF) is a syndrome that is associated with high short-term mortality. Surgical procedures are a known precipitating event for ACLF. This study investigates the role of preoperative insertion of a transjugular intrahepatic portosystemic shunt (TIPS) on postoperative mortality and ACLF development. Patients with TIPS insertion before a surgical procedure exhibit improved postoperative survival and lower rates of postoperative ACLF, especially in patients undergoing visceral surgery and with a high CLIF-C AD prognostic score. Thus, this study suggests preoperative TIPS insertion in those high-risk patients.