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Abstract
Self-control is a personality trait that explains undersaving and nonparticipation decisions. We show that self-control failure also affects trading behavior among individuals on capital markets. We use smoking as the most socially accepted example of self-control failure among 13,644 German brokerage clients and compare the trading behavior of 3,553 smokers and 10,091 nonsmokers. Smokers are associated with a higher portfolio turnover unexplained by financial sophistication or wealth effects. Self-control failure also exacerbates overconfidence, social contagion, sensation seeking, and attention grabbing. Overall, self-control failure is costly because it increases the gap between gross and net returns of smokers relative to nonsmokers.
Original language | English |
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Journal | Journal of Empirical Finance |
Volume | 63 |
Pages (from-to) | 73-95 |
Number of pages | 23 |
ISSN | 0927-5398 |
DOIs | |
Publication status | Published - Sept 2021 |
Externally published | Yes |
Keywords
- Individual investor
- Investment biases
- Overtrading
- Self-control
- Trading behavior
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Dive into the research topics of 'Smoking hot portfolios? Trading behavior, investment biases, and self-control failure'. Together they form a unique fingerprint.Activities
- 2 Participation in or organisation af a conference
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SFS Cavalcade North America 2020
Meyer, S. (Speaker) & Uhr, C. (Speaker)
25 May 2020 → 28 May 2020Activity: Participating in or organising an event types › Participation in or organisation af a conference
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2019 Boulder Summer Conference on Consumer Financial Decision Making
Meyer, S. (Speaker) & Uhr, C. (Speaker)
19 May 2019 → 21 May 2019Activity: Participating in or organising an event types › Participation in or organisation af a conference