Papers and most important findings

Question 1

Mental Accounting in portfolio choice: evidence from a flypaper effect.

Answer 1

Contributions: matching contribution drops after they have to make an active choice. Also both contributions and balances quite stable -> inertia.

Question 2

Are investors reluctant to realize their losses?

Answer 2

Average PGR > average PLR (except for dec.)

Ratio PGR/PLR is approx. 1.5 so average propensity to sell is 50% larger for winners compared to losers.

Question 3

Do individual investors have asymmetric information based on work experience?

Answer 3

Professional close stocks are riskier, no evidence found that professional proximity is associated with abnormal returns. Overconfidence seems most likely to explain trading in professionally close stocks.

Question 4

All that Glitters: The effect of attention and news on the buying behaviour of individual and institutional investors

Answer 4

Retail investors limit the choice set by focusing on attention grabbing events when buying stocks (and not while selling).

Question 5

Sensation Seeking, Overconfidence and Trading activity

Answer 5

Sensation seekers and those who exhibit overconfidence trade more.
A lot is left unexplained, r2 is around 15%. Gender no role in sensation seeking, both absence and the excess of the two traits seems to hurt portfolio performance.

Question 6

Uninformative feedback and risk taking: evidence from retail forex trading

Answer 6

All three measures respond to past gains and losses in a asymmetric fashion. Past week gains strongly associated with higher-risk taking and higher perceived skill. Conversely past week’s losses have a minimal effect on the variables. Effects are strongest in the earliest weeks of trading behavior.

Question 7

The role of information and social interactions in retirement plan decisions: evidence from a randomized experiment

Answer 7

The decision to attend a benefits fair is strongly affected by social/network/peer effects. Attending the fair has a positive impact on retirement plan participation. Direct effect (receiving a letter) is equal in size compared to indirect effect (peers receive a letter).

Question 8

Neighbors Matter: Causal community effects and stock market participation

Answer 8

Stock ownership in a community can partly be explained by the stock ownership in states where non-native community members were born.

Question 9

Investor Sentiment in the Stock Market

Answer 9

High sentiment wil lead to a high valuation and low sentiment vice versa. Key result is that high sentiment leads to low returns (high valuation drives subsequent low returns)

Question 10

Replicating anomalies; the review of financial studies

Answer 10

2/3 of the documented anomalies fail to replicate.

Question 11

Financial literacy and portfolio dynamics

Answer 11

Clear positive association between literacy and portfolio returns, however it is a relatively modest one.
It seems that more literate individuals increase their risky share when expected returns are higher.

Question 12

The financial education fallacy

Answer 12

Key objection to financial education is that it is extremely costly, because;
- Extensive training
- Tailor-made (because of consumer heterogeneity)
- Live-long and frequent education
- Lack of interest
- Debiasing is very hard
She advocates to outsource it via financial advisors.

Question 13

Save more tomorrow: using behavioural economics to increase employee saving

Answer 13

Many people decide to join the plan, driven by company encouragement. Only a few dropped out. For those who joined and stayed; saving rate increases dramatically. They use behavioural pitfalls to their own advantage.