Research
Research
Cash me if you can: ATM explosions, payment choice, and consumption
with Esad Smajlbegovic, Daniel Urban, and Michael Weber
Abstract: We study the consumption effects of a shift from cash to card payments. We exploit 275 explosive attacks on automated teller machines (ATMs) in Germany, which provide plausibly exogenous variation in the availability of cash. Using home scan data, we find that households increase their consumption by 2.3% after an ATM in their vicinity is attacked. Purchases of more expensive, branded products, and temptation goods drive the increase in spending, and the effect largely dissipates after 3 months. Payment diaries from survey data suggest a significant long-term rise in card payments following explosive attacks. Overall, the results are consistent with short-term overspending as consumers transition to digital payments.
Presented at: Kentucky Finance Conference, the Lapland Household Finance Summit, the Annual Meeting of the Swiss Society for Financial Market Research, University of Amsterdam, Erasmus University Rotterdam, and Frankfurt School of Finance & Management.
with Samuli Knüpfer and Elias Rantapuska
Abstract: People often cite family and friends as important sources of financial advice. We study the impact of this social financial advice by using comprehensive administrative data on social networks and an identification strategy leveraging job switches to financial advisor roles. Gaining access to social financial advice significantly increases stock market participation. This effect declines in social distance, persists across socioeconomic groups, is absent for safe assets, and does not extend to other finance professionals. Our results are consistent with complementarity of investment expertise with client-facing skills being essential for advisors to successfully convert their social connections into investors.
Presented at: Aalto University, Aarhus University, BI Norwegian Business School, CFA Society Finland, FIRS Berlin, EFA Amsterdam, Luxembourg Household Finance Conference, Nordic Finance Network, St. Gallen Financial Economics Workshop, Svenska Handelsbanken, Tallinn University of Technology, University of Jyväskylä, University of Oulu, University of Vaasa, and Vienna University of Economics and Business.
with Vidhan K. Goyal, Daniel Schmidt, and Daniel Urban
Abstract: We find that firms improve their environmental performance once added to newly created indexes; their environmental scores improve, and emissions decline. Our results support the view that the inelastic demand of passive investors facilitates investments in expensive, cleaner technology: after index addition, we observe a lower sensitivity of stock prices to financial performance, lower profitability, and higher R&D investments. Climate improvements are larger when index additions occur in countries with fewer environmental subsidies and where green investments are more expensive. The effects are also larger in countries where firms are more exposed to climate change-related risks due to low environmental performance, little climate change preparedness, and high regulatory and transition risk.
Presented at: HEC-HKUST Sustainable Finance Webinar and Conference 2023
with Gesa-Kristina Petersen
Abstract: Financial markets and economic conditions induce stress, but does stress, in turn, have a causal effect on investor behavior and markets? We analyze this question in bubble-prone experimental asset markets with 492 participants. We induce acute stress, measured with cortisol levels, heart rates, and self-assessments. We find that stressed markets herd more and develop prolonged price bubbles, although bubble magnitude remains unaffected. Markets with financially literate investors exhibit less herding under stress. Our findings are in line with investors seeking conformity under stress. We find no evidence that willingness to take risks or cognitive performance drives our results
Presented at: Rotterdam Behavioral Finance Conference 2022 (Poster); Central Nordic Finance Seminar, 2022; European Finance Association (EFA), Oslo 2016; Annual Meeting of Empirical Asset Pricing, Kiel 2016; Experimental Finance, Nijmegen 2015; Boulder Summer Conference 2015 (Poster); Seminars: University of Münster 2015, Aalto University 2018.
Abstract: Early life experiences and interventions are formative for later life economic and financial behavior. I show that financial socialization of children through pocket money payments increases financial market participation. The effect is long lived and stronger for children with less exposure to local banking services during childhood. Pocket money increases financial market participation likely by increasing financial literacy and trust in financial institutions. The findings suggest a simple, yet effective tool to raise children to become investors.
Presented at: Aalto University, Bayes Business School, Lund University, Stockholm University, NFN Young Scholars Workshop, University of Amsterdam.
with Torsten Jochem