Bank Secrecy in Offshore Centers and Capital Flows: Does Blacklisting Matter? with Andrea D’Angelo and Donato Masciandaro (2017) Review of Financial Economics, 32: 30-57 (paper)
Banking Secrecy and Global Finance: Economic and Political Issues with Donato Masciandaro (2015) Palgrave Macmillan (publisher website)
Unshrouding product-specific attributes through financial education with Vimal Balasubramaniam, Aditi Dimri, and Renuka Sane (Accepted at the Journal of Development Economics)
Financial education interventions are considered successful when they help households make better financial decisions. However, this fails to account for the general equilibrium consequences of such an intervention. We redefine successful financial education as one where such interventions result in large enough effect sizes to move the market to an equilibrium where firms find it in their interest to unshroud product features to all consumers. We then assess a new product-specific rules of thumb-driven consumer financial education program in India. Our intervention improves knowledge and outcomes for newly-educated consumers. It is, however, a Pareto-improvement only under a narrow set of conditions. Positive treatment effects for a small fraction of retail consumers may come at the cost of other uninformed consumers. They are not enough to move the market to an unshrouded equilibrium, questioning the effectiveness of such an intervention.
Peer Effects in Multi-Layer Networks: Evidence from Financial Behavior with Gabriela Stockler (SSRN)
We examine the simultaneous peer effects of co-workers, family, and neighbors in financial behavior using Danish registry data. We find that neighbors exert the strongest influence, followed by co-workers and family members. Peer effects are stronger for stocks than for mutual funds, and among experienced investors. While co-workers primarily influence buying decisions, neighbors affect both buying and selling, suggesting distinct channels of influence across peer groups. A multi-layer network model formalizes our empirical results, showing that an investor’s trading activity depends on her centrality within and across network layers. Our findings provide new insights into the drivers and implications of peer effects in financial markets.
Personal Financial Advice and Portfolio Quality with Claes Bäckman, Andreas Hackethal, Tobin Hanspal, and Dominique M. Lammer (SSRN, under review, Review of Finance)
We document the widespread use of personal financial advice among retail investors. Individuals seek competent and trusted sources for financial advice among their family and friends. Investors who provide advice to family and friends are positively selected and emphasize the reputational costs of giving risky financial advice. While previous studies have shown that advice shared on social media promotes active trading, we show that personal financial advice encourages investing in funds over single stocks. Our evidence complements the existing literature on financial advice in online social networks by highlighting differences in incentives and outcomes of advice to close personal connections.
Beyond Connectivity: Stock Market Participation in a Network with Claes Bäckman and Anastasiia Parakhoniak (SSRN, R&R Journal of Economic Dynamics and Control)
What are the aggregate and distributional consequences of the relationship between an individual’s social network and financial decisions? Motivated by several well-documented facts about the influence of social connections on financial decisions, we build and calibrate a model of stock market participation with a social network that emphasizes the interplay between connectivity and network structure. Since connections to informed agents help spreading information, there is a pivotal role for homophily. An increase in the average number of connections raises the average participation rate, mostly due to richer agents. Higher homophily benefits richer agents by creating clusters where information spreads more efficiently. We show empirical evidence consistent with the importance of connectivity and sorting. We discuss several new avenues for future research into the aggregate impact of peer effects in finance.
Greener Pensions, Greener Choices: Linking Investments to Sustainable Behavior with Charlotte Christiansen and Malene Kallestrub-Lamb (SSRN)
This paper examines how offering sustainable investment options influences sustainable consumption behavior. We combine a natural experiment in which individuals receive an option to switch to a pension plan with a strong sustainability profile with detailed household register data. This sustainable option improves sustainable consumption, as reflected in electric vehicle adoption and reduced vehicle emissions. The effect is primarily driven by individuals who do not choose the sustainable plan. We show that making sustainable investment available can create positive spillover effects on other sustainable behaviors, highlighting the potential of financial tools to support broader societal change.
Ticker, Ticker, Boom: Algorithms Defuse Ticker Confusion with Claes Bäckman, Arze Karam, and Anastasiia Parakhoniak
This paper examines the relationship between short-term non-fundamental pricing and algorithmic trading. We study trading in two firms that share similar tickers and show that events that trigger trading in the first ticker trigger spillover into trading for the second ticker. This trading leads to non-fundamental pricing errors. Algorithmic trading contributes to more efficiency by lowering the spread, which suggests that algorithmic trading arbitrages away pricing errors and stabilizes the market around non-fundamental trading.
Social Dimensions of ESG Investment with Charlotte Christiansen and Malene Kallestrub-Lamb
Discrimination and Demand for Financial Advice with Markus Eyting, Judd B. Kessler, Christine Laudenbach, and Bianca Putz