Working papers

With Sebastien Betermier, Laurent Calvet, and Jens Kvaerner| Working paper, 2022

A three-factor model, featuring the market portfolio and long-short portfolios of stocks sorted by investor age or wealth, explains both the common variation in portfolio holdings and the cross-section of stock returns. Portfolio tilts toward investor factors correlate with indebtedness, macroeconomic exposure, gender, education, and investment experience. Our results are consistent with hedging and sentiment jointly driving portfolio decisions and the cross-section of equity premia.

With Ville Rantala and Petra Vokata| Working paper, 2021

Victims of investment fraud experience a long-run income loss that exceeds the direct investment loss. The income loss arises from a combination of unemployment, absenteeism, mobility, and labor force exit. Victims also experience higher indebtedness and more divorces and shy away from investments delegated to asset managers. These scars from fraud victimization add to the social cost of fraud and are relevant for optimal regulatory design.

With Elias Rantapuska and Matti Sarvimäki | Working paper, 2021

Investors tend to hold the same securities as their parents. Instrumental variables that exploit social networks and a natural experiment based on mergers make it possible to attribute the security-choice correlation to social influence within families. The resulting identical security holdings increase intergenerational correlations in portfolio choice, exacerbate wealth inequality, and amplify the consequences of behavioral biases.

With Matti Keloharju and Joacim Tåg | Working paper, 2021

CEOs are in much better health than the population and on par with other high-skill professionals. These patterns apply in particular to mental health and to CEOs of larger companies. Health predicts appointment to a CEO position, the CEO position has no discernible impact on the health of its holder, and health is associated with CEO turnover. These results are consistent with boards appointing CEOs with health robust enough to withstand the pressures of the job, correcting mismatches occurring at the time of appointment, and responding expediently to health shocks. Nevertheless, poor CEO health translates into a reduction in corporate performance, suggesting, board oversight has enough friction for CEO health to affect performance.


With Matti Keloharju and Joacim Tåg | Financial Management, forthcoming | Journal version

A comprehensive battery of business, economics, and engineering graduates’ characteristics explains 40% of the gender gaps in CEO appointments, and 60% among graduates with children. The explanatory power mostly comes from absences and unemployment, which are about twice as likely for women as men. Earlier version featured in HBS Working Knowledge, Helsingin Sanomat (in Finnish), and Dagens Nyheter (in Swedish)

With Renée Adams and Matti Keloharju | Journal of Financial Economics, 2018 | Journal version | Internet Appendix

The median large-company CEO belongs to the top 5% of the population in the combination of cognitive and non-cognitive ability and height, measured at age 18. These traits have a monotonic and close to linear relationship with CEO pay, but their correlations with pay, firm size, and CEO fixed effects in firm policies are relatively low. Traits appear necessary, but not sufficient for making it to the top. Featured in Harvard Business Review, Financial Times, Wall Street Journal, Helsingin Sanomat (in Finnish), and Dagens Nyheter (in Swedish).

With Elias Rantapuska and Matti Sarvimäki | Journal of Finance, 2017 | Journal version | Internet Appendix

Workers adversely affected by labor market shocks are permanently less likely to invest in risky assets. This finding shows that experiences can be a source of persistent disagreement or preference heterogeneity. Featured in the Economist.

With Mark Grinblatt, Seppo Ikäheimo, and Matti Keloharju | Management Science, 2016 | Journal version

Individuals endowed with better cognitive skills are less likely to choose mutual funds that charge higher fees. Catering to such heterogeneity may explain the great number of mutual funds and the large dispersion in fees charged on essentially identical products.

With Markku Kaustia and Sami Torstila | Management Science, 2016 | Journal version

Individuals who became shareholders through the conversions of mutual companies into publicly listed firms were more likely to vote right-of-center. This shift in voting implies that political preferences are affected by wealth-related changes in the individuals’ circumstances

With Markku Kaustia | Journal of Financial Economics, 2012 | Journal version

Individuals are much more likely to start investing in equities when the stock market performance of their local peers has been favorable. However, only positive performance seems to matter. This bias in the social transmission process can explain how erroneous beliefs spread in the population.

With Matti Keloharju and Juhani Linnainmaa | Review of Financial Studies, 2012 | Journal version

The tastes individuals develop for particular firms through consuming their products and services spill over to the individuals’ investment decisions. This behavior suggests investors treat stocks as consumption goods.

With Markku Kaustia | Journal of Finance, 2008 | Journal version

Investors strongly react to their history of IPO investment outcomes by increasing future IPO subscriptions following a string of good outcomes and decreasing subscriptions after bad outcomes. This pattern is consistent with reinforcement learning, the leading alternative to rational Bayesian learning.

With Matti Keloharju and Sami Torstila | Review of Financial Studies, 2008 | Journal version

The total cost from using arrangements to attract retail investors and to discourage them from selling their shares in the aftermarket amounts to about three percent of the total privatization proceeds. Retail incentives have been effective in achieving their stated goals, suggesting room for policy initiatives that help individuals to avoid the mistake of not participating in the stock market.

With Elias Rantapuska | Review of Finance, 2008 | Journal version

Losses from not exercising subscription rights and from selling them at depressed prices are not large for the average investor, but they matter more for inactive and less affluent investors. This finding suggests heterogeneity in investor behavior that stems from financial sophistication.