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Smart(phone) investing? A within investor-time analysis of new technologies and trading behavior
(2021)
Using transaction-level data from two German banks, we study the effects of smartphones on investor behavior. Comparing trades by the same investor in the same month across different platforms, we find that smartphones increase purchasing of riskier and lottery-type assets and chasing past returns. After the adoption of smartphones, investors do not substitute trades across platforms and buy also riskier, lottery-type, and hot investments on other platforms. Using smartphones to trade specific assets or during specific hours contributes to explain our results. Digital nudges and the device screen size do not mechanically drive our results. Smartphone effects are not transitory.
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.
Fiscal policies and household consumption during the COVID-19 pandemic: a review of early evidence
(2020)
We review early evidence on how household consumption behavior has evolved over the pandemic and how different groups of households have responded to fiscal stimulus programs. Due to the scarcity of evidence for Europe, our review focuses on evidence from the US. Notwithstanding the institutional and demographic differences, we highlight generalizable findings and challenges to the design of stimulus policies from the pandemic. In conclusion, we identify several open issues for dis cussion.
In diesem Beitrag wird ein Vorschlag vorgestellt, wie es trotz langfristiger Niedrigzinsen möglich ist, die vor 18 Jahren eingeführte Riester-Rente so umzugestalten, dass alle Beteiligten davon profitieren. Wird die Mindestauszahlung am Ende der Vertragslaufzeit nur für die Eigenbeiträge, nicht aber für die staatlichen Zulagen garantiert, können deutlich höhere Renditen erzielt werden. Unter dem Strich haben dann nicht nur Privatleute mehr Geld aus ihrer Altersvorsorge, sondern der Staat wird mehr Steuern einnehmen und die Anbieter haben mehr Spielraum für bedarfsgerechte Produktgestaltung.
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.
Incentivized experiments in which individuals receive monetary rewards according to the outcomes of their decisions are regarded as the gold standard for preference elicitation in experimental economics. These task-related real payments are considered necessary to reveal subjects' "true preferences". Using a systematic, large-sample approach with three subject pools of private investors, professional investors, and students, we test the effect of task-related monetary incentives on risk preferences elicited in four standard experimental tasks. We find no systematic differences in behavior between subjects in the incentivized and non-incentivized regimes. We discuss implications for academic research and for applications in the field.
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.
Dieser Text fasst eine Studie zusammen, die für das Bundesministeriums für Ernährung, Landwirtschaft und Verbraucherschutz verfasst wurde und sich mit dem Kundennutzen von Anlageberatung auseinandersetzt. Das erhebliche Potenzial von interessenskongruenter Anlageberatung wird aufgezeigt und die aktuell geringe Leistungstransparenz im Markt kritisiert. Es wird empfohlen, ein standardisiertes Vokabular für Depotrisiken einzuführen und den Zugang aller Anleger zu leicht verständlichen und vergleichbaren Informationen zu historischem Depotrisiko und historischer Deporendite sicherzustellen. Die Studie fokussiert auf Wertpapierberatung und damit zuvorderst auf jene Teilmenge von Verbrauchern, die über Anlagevermögen verfügen. Die Grundideen zu Leistungstransparenz und standardisiertem Risikovokabular lassen sich jedoch auch z.B. auf den Alterssicherungsmarkt übertragen.
We educate investors with significant dividend holdings about the benefits of dividend reinvestment and the costs of misperceiving dividends as additional, free income. The intervention increases planned dividend reinvestment in survey responses. Using trading records, we observe a corresponding causal increase in dividend reinvestment in the field of roughly 50 cents for every euro received. This holds relative to their prior behavior and a placebo sample. Investors who learned the most from the intervention update their trading by the largest extent. The results suggest the free dividends fallacy is a significant source of dividend demand. Our study demonstrates that simple, targeted, and focused educational interventions can affect investment behavior.
Zum ersten Mal wurde in Deutschland eine groß angelegte wissenschaftliche Studie zur Machbarkeit und zum Nutzen einer säulenübergreifenden Renteninformationsplattform durchgeführt, unter realen Bedingungen und mit mehreren tausend Teilnehmern. Die beiden zentralen Ergebnisse sind, dass ein elektronisches Rentencockpit auch in Deutschland technisch machbar ist und beträchtlichen individuellen Zusatznutzen für die Bürgerinnen und Bürger stiften würde. Die Langfristanalysen der Pilotstudie zeigen, dass selbst die einmalige Schaffung von Rententransparenz für viele Teilnehmer Anlass genug ist, ihren Rentenplan zu überdenken und sich aktiv mit ihrer Altersvorsorge auseinanderzusetzen und ihr Verhalten zu ändern. Teilnehmer mit Zugang zu einem elektronischen Rentencockpit fühlen sich nach der Studie deutlich besser informiert und neigen dazu ihr Sparverhalten stärker anzupassen als Personen ohne Zugang. Die außerordentlich hohe Bereitschaft zur Teilnahme und die Antworten in den Online-Befragungen sind zudem Beleg für den großen Bedarf an systemgestützter, individueller Rententransparenz. Soll ein Rentencockpit Verbreitung in Deutschland finden, scheint eine automatisierte, elektronische Bereitstellung von Vertragsdaten von Seiten der Rententräger jedoch unabdingbar, da die eigenständige Suche und teilmanuelle Bereitstellung von Standmitteilungen für die meisten Studienteilnehmer ein großes Hindernis darstellt.
Andreas Hackethal: Better than a pension guarantee would be to allow citizens finally more insights.
We conduct a field experiment with clients of a German universal bank to explore the impact of peer information on sustainable retail investments. Our results show that infor-mation about peers’ inclination towards sustainable investing raises the amount allocated to stock funds labeled sustainable, when communicated during a buying decision. This effect is primarily driven by participants initially underestimating peers’ propensity to invest sustainably. Further, treated individuals indicate an increased interest in addi-tional information on sustainable investments, primarily on risk and return expectations. However, when analyzing account-level portfolio holding data over time, we detect no spillover effects of peer information on later sustainable investment decisions.
We show that financial advisors recommend more costly products to female clients, based on minutes from about 27,000 real-world advisory meetings and client portfolio data. Funds recommended to women have higher expense ratios controlling for risk, and women less often receive rebates on upfront fees for any given fund. We develop a model relating these findings to client stereotyping, and empirically verify an additional prediction: Women (but not men) with higher financial aptitude reject recommendations more frequently. Women state a preference for delegating financial decisions, but appear unaware of associated higher costs. Evidence of stereotyping is stronger for male advisors.
Financial literacy affects wealth accumulation, and pension planning plays a key role in this relationship. In a large field experiment, we employ a digital pension aggregation tool to confront a treatment group with a simplified overview of their current pension claims across all pillars of the pension system. We combine survey and administrative bank data to measure the effects on actual saving behavior. Access to the tool decreases pension uncertainty for treated individuals. Average savings increase - especially for the financially less literate. We conclude that simplification of pension information can potentially reduce disparities in pension planning and savings behavior.