Smoking Hot Portfolios? Self-Control and Investor Decisions

44 Pages Posted: 6 Mar 2019 Last revised: 20 Jun 2019

See all articles by Charline Uhr

Charline Uhr

Goethe University Frankfurt

Steffen Meyer

University of Southern Denmark - Department of Business and Economics; Danish Finance Institute

Andreas Hackethal

Goethe University Frankfurt - Faculty of Economics and Business Administration; Goethe University Frankfurt - Research Center SAFE

Date Written: June 2019

Abstract

Self-control failure is among the major pathologies (Baumeister et al. (1994)) affecting individual investment decisions but cannot be measured bias-free. We link the time-series of government-controlled tobacco prices to debit/credit card transaction histories to identify smoking as a proxy for self-control failure and link it to investors’ trading records. The share of smokers and their demographics are in line with German survey data and federal statistics and comparable to nonsmokers. We compare 3,553 smokers to 10,091 nonsmokers and show that self-control failure predicts trading activity. We distinguish our proxy from overconfidence, sensation seeking, attention grabbing, gambling preferences, and peer effects.

Keywords: self-control; portfolio allocation; individual investor; trading behavior

JEL Classification: G41; D14, G21; G11

Suggested Citation

Uhr, Charline and Meyer, Steffen and Hackethal, Andreas, Smoking Hot Portfolios? Self-Control and Investor Decisions (June 2019). SAFE Working Paper No. 245 (2019). Available at SSRN: https://ssrn.com/abstract=3347625 or http://dx.doi.org/10.2139/ssrn.3347625

Charline Uhr (Contact Author)

Goethe University Frankfurt ( email )

Theodor-W.-Adorno-Platz
Frankfurt am Main, 60323
Germany

Steffen Meyer

University of Southern Denmark - Department of Business and Economics ( email )

DK-5230 Odense
Denmark

Danish Finance Institute ( email )

Andreas Hackethal

Goethe University Frankfurt - Faculty of Economics and Business Administration ( email )

Theodor-W.-Adorno Platz 3
Frankfurt am Main, 60323
Germany

Goethe University Frankfurt - Research Center SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

Register to save articles to
your library

Register

Paper statistics

Downloads
112
Abstract Views
705
rank
241,887
PlumX Metrics