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Publications
Publications
Dynamic Inconsistency in Risky Choice: Evidence from the Lab and Field
Dynamic Inconsistency in Risky Choice: Evidence from the Lab and Field
American Economic Review, Vol.115(1), pp. 330-63.
(with Rawley Heimer, Alex Imas and Martin Weber)
We document a robust dynamic inconsistency in risky choice. Using a unique brokerage dataset and two pre-registered experiments, we compare people's initial risk-taking plans to their subsequent decisions. In both settings, people accept risk as part of a "loss-exit" strategy - planning to continue taking risk after gains and stopping after losses. Actual behavior follows the reverse pattern, deviating from initial strategies by cutting gains early and chasing losses. More individuals accept risk when offered a commitment to their initial strategy. Our results reconcile seemingly contradictory findings on risk-taking in static versus dynamic contexts. Implications for theory and welfare are discussed.
Media coverage: The Wall Street Journal , Chicago Booth Review
Thinking about Prices versus Thinking about Returns in Financial Markets
Thinking about Prices versus Thinking about Returns in Financial Markets
The Journal of Finance, Vol. 74(6), pp.2997-3039
(with Markus Glaser and Martin Weber)
Prices and returns are alternative ways to present information and to elicit expectations in financial markets. But do investors make sense of prices and returns in the same way? This paper presents three studies with subjects of varying expertise, with various amounts of information and with different incentive schemes. The results are consistent across all studies: Asking subjects to forecast returns as opposed to prices results in higher expectations, whereas showing them return charts as opposed to price charts results in lower expectations. Experience is not a useful remedy but Cognitive Reflection mitigates the impact of format changes.
Media coverage: Harvard Business Manager
Working Papers
Working Papers
Corporate Actions as Moral Issues (New version!)
Corporate Actions as Moral Issues (New version!)
(with Elisabeth Kempf and Oliver Spalt)
We examine nonpecuniary preferences across a broad set of corporate actions using a representative sample of the U.S. population. Our core findings, based on large-scale online surveys, are that (i) self-reported nonpecuniary concerns are large both for stock market investors and non-investors; (ii) concerns about the treatment of workers and CEO pay rank highest—higher than concerns about workforce diversity and fossil energy usage; (iii) moral universalism emerges as an important driver of nonpecuniary preferences. Combined, our findings provide new evidence on the importance of moral concerns as a key determinant of nonpecuniary preferences over corporate actions.
Media coverage: ProMarket
Wall Street Crosses Memory Lane: How Witnessed Returns Affect Professionals' Expected Returns
Wall Street Crosses Memory Lane: How Witnessed Returns Affect Professionals' Expected Returns
(with Benjamin Christoffersen, Lena Jaroszek and Arvid Hoffmann)
Witnessing stock market history in the making leaves behind a vivid story, but does not provide valuable information. Nevertheless, well-versed finance professionals extrapolate from witnessed returns when forming beliefs about expected returns which we show by using a unique dataset regarding professionals' career start in the finance industry. This result is robust to controlling for all publicly available information and interpersonal differences. Additionally, we find that returns witnessed early on in a career are more formative than those witnessed recently. Among the potential channels through which witnessed returns might affect professionals' expectations, a judgmental bias appears the most plausible.
Media coverage: Neue Zürcher Zeitung, Euro Fondsxpress
Work in Progress
Work in Progress
Can a Robo-Adviser be a Money Doctor?
Can a Robo-Adviser be a Money Doctor?
(with Verena Dorner, Martin Weber and Christof Weinhardt)
We examine how to optimally design a robo-adviser for the purposes of financial risk taking.
How (Much) do Rankings Affect Attention? Evidence From an at-Scale Natural Field Experiment on the Finnish Stock Market
How (Much) do Rankings Affect Attention? Evidence From an at-Scale Natural Field Experiment on the Finnish Stock Market
(with Vesa Puttonen and Michael Ungeheuer)
We aim to quantify and understand the causal effect of a stock's ranking placement on investors' attention .
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