Publications
with Tobin Hanspal and Johannes Wohlfart
The Review of Economics and Statistics, accepted for publication
available here
We survey a representative sample of US households to study how exposure to the COVID-19 stock market crash affects expectations and planned behavior. Wealth shocks are associated with upward adjustments of expectations about retirement age, desired working hours, and household debt, but have only small effects on expected spending. We provide correlational and experimental evidence that beliefs about the duration of the stock market recovery shape households’ expectations about their own wealth and their planned investment decisions and labor market activity. Our findings shed light on the implications of household exposure to stock market crashes for expectation formation.
Current Working Papers
Beliefs about the Stock Market and Investment Choices: Evidence from a Field Experiment
with Christine Laudenbach and Johannes Wohlfart
Winner of the Society for Experimental Finance Vernon L. Smith Young Talent Award in Experimental Finance
e-mail me for a draft
We survey investors at a German online bank on their beliefs about how the return of the German stock market did historically depend on its past 12-month return. Respondents' elicited processes of belief formation strongly correlate with their past trading patterns. A random information treatment educating individuals about the historically low predictive power of recent past returns shifts individuals' beliefs about the autocorrelation of stock returns and moves 1-year ahead expectations towards the long-run historical mean return. Respondents adjust their risk-taking in an incentivized investment game and their actual trading plans in line with the experimentally induced change in return expectations.
Costs and Benefits of Financial Advice -- Evidence from Linked Survey and Administrative Data
e-mail me for a draft
I use linked survey and administrative data on retail investors at a German bank to study the motives and perceptions that underlie their demand for costly and generic financial advice. Demand for advice is driven by clients' trust in advisors and lack of financial confidence, and is associated with a strong valuation of non-monetary advisor services, such as personal contact and peace of mind in investing. Fees paid on advised investments increase in the valuation of these services. However, clients know little about the fees they pay, casting doubt on the notion that they consciously pay for intangible advisor services.
On the (Ir)Relevance of Monetary Incentivization in Risk Preference Elicitation Experiments
with Andreas Hackethal, Michael Kirchler, Christine Laudenbach and Michael Razen
e-mail me for a draft
Incentivized experiments in which individuals receive real rewards according to the outcomes of their decisions are considered the gold standard for eliciting preferences in experimental economics. Task-related real rewards are assumed necessary for subjects to reveal their true preferences. Using a systematic, large-sample approach with three different subject pools of private investors, finance professionals and students, we test the effect of task-related monetary incentives on risk preferences elicited in four standard experimental tasks. For three of the four tasks, we find no differences in behavior between subjects in the incentivized and non-incentivized regime, across subject pools. We discuss implications for academic research and for applications in the field.
Archived
Client Involvement in Expert Advice
with Andreas Hackethal, Christine Laudenbach and Steffen Meyer
We link minutes from 17,000 financial advisory sessions to data on clients' portfolios to study how active client involvement affects advisor recommendations and portfolio outcomes. Advisors confronted with acquiescent clients stick to their standards and recommend expensive but well diversified mutual fund portfolios. If clients take an active role in the meetings, advisors deviate markedly from their standards, resulting in poorer diversification and lower Sharpe ratios. Our findings parallel the phenomenon of doctors prescribing antibiotics to insistent patients even if inappropriate, and imply that pandering may reduce advice quality.