Working papers

With Sebastien Betermier, Laurent Calvet, and Jens Kvaerner | Working paper, 2023

A two-factor model, featuring the market portfolio and a long-short portfolio constructed from the holdings of investors sorted by age or wealth, explains both the common variation in portfolio holdings and the cross-section of stock returns. Portfolio tilts toward the investor factor correlate with indebtedness, macroeconomic exposure, gender, and investment experience. These findings illustrate the benefits of using holdings data for explaining the risk premia of financial assets.  

With Ville Rantala, Erkki Vihriälä, and Petra Vokata| Working paper, 2023

Victims of investment fraud experience a long-run income loss that twice exceeds the direct investment loss. Income first declines when an investor joins the fraudulent scheme, consistent with distorted beliefs lowering labor supply. The scheme’s collapse evokes a further decrease, which we attribute to financial stress caused by the collapse. These results inform us about how households respond to "phantom riches"—the illusion of attaining substantial wealth. 

With Elias Rantapuska and Theresa Spickers | Working paper, 2023

Bankers beneficially affect their family members' financial decisions. This banker effect declines in social distance, is more pronounced for nonparticipating individuals, and is greater for riskier assets. Our results collectively suggest bankers’ sales skills are more influential in effecting change than their financial knowledge alone.

With Matti Keloharju, Dagmar Müller, and Joacim Tåg | Working paper, 2022

About 7% (5%) of PhD students receive medication or diagnosis for depression (anxiety) in a given year. These prevalence rates are much lower than those based on surveys reported in the earlier literature. PhD students’ mental health significantly worsens relative to their peers after they have entered the program. 


With Matti Keloharju and Joacim Tåg | Leadership Quarterly, 2023 | Journal version  

CEOs are in much better health than the population and on par with other high-skill professionals. These results apply in particular to mental health and to CEOs of larger companies. Three channels can account for CEOs’ robust health. First, health predicts appointment to a CEO position. Second, the CEO position has no discernible impact on the health of its holder. Third, poor health is associated with greater CEO turnover. Here, both contemporaneous health and health at the time of appointment matter. Poor CEO health also predicts poor firm outcomes. 

With Elias Rantapuska and Matti Sarvimäki | Review of Finance, forthcoming  | Journal version  

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 | Financial Management, 2022 | 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.