Chapter 9: Money and Happiness: Implications for Investor Behavior

Investor Behavior: The Psychology of Financial Planning and Investing. H. Kent Baker and Victor Ricciardi, editors, 153-169, Hoboken, NJ: John Wiley & Sons, Inc. , 2014.

Posted: 30 May 2014

Date Written: February 10, 2014

Abstract

This chapter provides a synthesis of the research literature on the relationship between money and happiness. Money refers to income and income-related factors. Happiness is typically measured by life satisfaction, but also by daily happiness and living a meaningful life. Based on research evidence, personal income increases happiness to a certain degree in a nonlinear fashion. In the range from low to middle income, income has a strong positive relationship with happiness. From middle to high income levels, the positive association between income and happiness diminishes. People living in richer countries are happier. Unhappiness results from seeking materialist goals. Most research studies examine whether income increases happiness. The emerging academic literature examines the reverse causality and explores whether happier people make more money, which is gaining empirical support. The chapter provides a discussion of the implications of these research findings for investor behavior.

Keywords: Financial well-being, income, subjective well-being, happiness, behavioral finance, financial psychology, behavioural finance, behavioral economics, behavioural economics

JEL Classification: A12, D81, G00, G30, G10, M00, M10, M41

Suggested Citation

Xiao, Jing Jian, Chapter 9: Money and Happiness: Implications for Investor Behavior (February 10, 2014). Investor Behavior: The Psychology of Financial Planning and Investing. H. Kent Baker and Victor Ricciardi, editors, 153-169, Hoboken, NJ: John Wiley & Sons, Inc. , 2014., Available at SSRN: https://ssrn.com/abstract=2443041

Jing Jian Xiao (Contact Author)

University of Rhode Island ( email )

Transition Center
Kingston, RI 02881
United States
401-874-2547 (Phone)
401-874-4020 (Fax)

HOME PAGE: http://www.uri.edu/hss/hdf/faculty/JingJXiao.htm

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