330 Wirtschaft
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WE STUDY REDISTRIBUTIVE EFFECTS OF INFLATION USING A RANDOMIZED INFORMATION EXPERIMENT ON BANK CLIENTS. ON AVERAGE, INDIVIDUALS ARE WELL INFORMED ABOUT CURRENT INFLATION AND ARE CONCERNED ABOUT ITS IMPACT ON WEALTH. YET, MOST INDIVIDUALS ARE NOT AWARE OF HOW INFLATION ERODES NOMINAL POSITIONS. ONCE THEY RECEIVE INFORMATION ON THIS EROSION CHANNEL, THEY UPDATE PERCEPTIONS AND EXPECTATIONS ABOUT OWN NET NOMINAL POSITIONS. LEARNING ABOUT THE INFLATION-INDUCED EROSION OF NOMINAL POSITIONS CAUSALLY AFFECTS CHOICES IN HYPOTHETICAL REAL-ESTATE TRANSACTIONS AND ACTUAL CONSUMPTION. THE FINDINGS SUGGEST THAT HOUSEHOLD WEALTH MEDIATES THE SENSITIVITY OF CONSUMPTION TO INFLATION ONCE HOUSEHOLDS ARE AWARE OF THE BALANCE-SHEET EFFECTS OF INFLATION.
What does your personality reveal about your financial behavior? Evidence from a FinTech experiment
(2022)
We co-operate with a German financial account aggregator (FAA) and conduct a personality survey with 1,700 app users. We combine the survey results with their anonymized transaction data and investigate links between personality traits and spending behavior. Observing many lottery windfalls in our dataset and treating these incidents as real-life experiments, we ask: what do individuals do with unexpected income changes? Our findings suggest that highly extraverted individuals tend to overspend in response to lottery windfalls.
WE STUDY WHETHER PRIVATE EQUITY (PE) FIRMS HAVE A POSITIVE IMPACT ON THE FINANCIAL PERFORMANCE OF THEIR GERMAN PORTFOLIO COMPANIES BEFORE AND AFTER THE IPO. OUR EMPIRICAL ANALYSIS IS BASED ON A UNIQUE AND LARGE DATASET OF ALL IPOS IN GERMANY BETWEEN 2000 AND 2007. WE FIND THAT PE FIRMS SELECT COMPANIES WITH BELOW AVERAGE PERFORMANCE AND THEN IMPROVE PERFORMANCE SUBSTANTIALLY UNTIL THE IPO DATE AND IN MANY CASES ALSO THEREAFTER. THIS IMPLIES THAT PE FIRMS FILL A VOID ALSO IN GERMAN FINANCIAL MARKETS AND THAT THEY WILL ALSO PLAY A FUTURE ROLE IN FINANCING GERMAN ENTERPRISES.
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.
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.
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.