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Niculaescu CE, Sangiorgi I, Bell AR. Does personal experience with COVID-19 impact investment decisions? Evidence from a survey of US retail investors. Int Rev Financ Anal 2023; 88:102703. [PMID: 37313178 PMCID: PMC10226778 DOI: 10.1016/j.irfa.2023.102703] [Citation(s) in RCA: 0] [Impact Index Per Article: 0] [Reference Citation Analysis] [What about the content of this article? (0)] [Affiliation(s)] [Abstract] [Key Words] [Track Full Text] [Figures] [Subscribe] [Scholar Register] [Received: 12/06/2022] [Revised: 04/20/2023] [Accepted: 05/22/2023] [Indexed: 06/15/2023]
Abstract
This paper explores the link between personal experience with COVID-19 and US retail investors' financial decision-making during the first COVID-19 wave. Do retail investors that have personally experienced COVID-19 change their investments after the pandemic outbreak, and if so, why? We use a cross-sectional dataset from an online survey of US retail investors collected in July and August 2020 to assess if and how respondents change their investment decisions after the COVID-19 outbreak. On average retail investors increase their investments during the first wave of COVID-19 by 4.7%, while many of them decrease their investments suggesting a high heterogeneity of investor behaviours. We provide the first evidence that personal experience with the virus can have unexpected positive effects on retail investments. Investors who have personal experience with COVID-19, who are in a vulnerable health category, who tested positive, and who know someone in their close circle of friends or family who died because of COVID-19, increase their investments by 12%. We explain our findings through terror management theory, salience theory and optimism bias, suggesting that reminders of mortality, focussing on selective salient investment information, and over-optimism despite personal vulnerable health contribute to the increase in retail investments. Increased levels of savings, saving goals and risk capacity are also positively associated with increased investments. Our findings are relevant to investors, regulators, and financial advisors, and highlight the importance of providing retail investors with access to investment opportunities in periods of unprecedented shocks such as COVID-19.
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Affiliation(s)
- Corina E Niculaescu
- ICMA Centre, Henley Business School, University of Reading, Berkshire, RG6 6BA, UK
| | - Ivan Sangiorgi
- ICMA Centre, Henley Business School, University of Reading, Berkshire, RG6 6BA, UK
| | - Adrian R Bell
- ICMA Centre, Henley Business School, University of Reading, Berkshire, RG6 6BA, UK
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Flores EV, Lichtenberg PA. Cross-Validation of the Lichtenberg Financial Decision Rating Scale. Clin Gerontol 2023; 46:633-638. [PMID: 36995146 PMCID: PMC10858408 DOI: 10.1080/07317115.2023.2196989] [Citation(s) in RCA: 0] [Impact Index Per Article: 0] [Reference Citation Analysis] [What about the content of this article? (0)] [Affiliation(s)] [Abstract] [Key Words] [MESH Headings] [Grants] [Track Full Text] [Journal Information] [Submit a Manuscript] [Subscribe] [Scholar Register] [Indexed: 03/31/2023]
Abstract
OBJECTIVES The Lichtenberg Financial Decision Rating Scale (LFDRS) is a person-centered tool for analyzing the integrity of financial decision-making abilities. Initial studies supported its reliability and validity (Lichtenberg et al., 2020; Lichtenberg et al., 2017; Lichtenberg et al., 2015). This study examines the cross-validation of the LFDRS Scale to assess its concurrent validity with a measure of executive functioning and suspected financial exploitation (FE). METHODS Ninety-five older adult community participants underwent an assessment session. The total LFDRS was significantly related to executive functioning. RESULTS Trail Making Test Part B was the only significant predictor of the LFDRS total score in a regression equation. An independent sample t-test showed that victims of FE scored higher on the LFDRS than those who were not victims. CONCLUSIONS These findings are consistent with the initial validation study of the LFDRS and the initial study on the intersection of decision-making and FE (Lichtenberg et al., 2017, 2020) and adds evidence supporting the LFDRS concurrent validity.
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Affiliation(s)
- Emily V Flores
- Institute of Gerontology, Wayne State University, Detroit, Michigan, USA
- Department of Psychology, Wayne State University, Detroit, Michigan, USA
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Coundouris SP, Hohn S, Basu A, Dulleck U, Henry JD, Cherbuin N. Cognition and Financial Decision-Making in Older Adult Spouses. Gerontology 2023; 69:1128-1136. [PMID: 37231845 PMCID: PMC10614223 DOI: 10.1159/000531193] [Citation(s) in RCA: 0] [Impact Index Per Article: 0] [Reference Citation Analysis] [What about the content of this article? (0)] [Affiliation(s)] [Abstract] [Key Words] [MESH Headings] [Track Full Text] [Journal Information] [Subscribe] [Scholar Register] [Received: 11/21/2022] [Accepted: 05/19/2023] [Indexed: 05/27/2023] Open
Abstract
INTRODUCTION Age-related decline in executive functioning has been found to negatively impact one's capacity to make prudent financial decisions. The broader literature also speaks to the importance of considering interrelatedness in older spouses' functioning, as these individuals typically represent one's longest and closest relationship that involves an extended history of shared experiences. Accordingly, the aim of the present study was to provide the first examination of whether older adults' financial decision-making capacity is impacted not only by their own but also by their partner's, level of cognitive functioning. METHOD Sixty-three heterosexual spousal dyads comprising older adults aged 60-88 participated. The contribution of executive functioning and perceptions of partner's cognitive decline on financial decision-making behavior and financial competency was assessed through two actor-partner interdependence models. RESULTS As predicted, for both genders, one's own executive functioning was predictive of one's own financial decision-making capacity. However, of particular interest was the finding that for females (but not males) perceiving greater cognitive decline in their spouse predicted their own (greater) financial competency. CONCLUSION Examining whether partner interdependence extends to the realm of financial decision-making is not only a theoretically but also practically important question. These data provide initial insights that such a relationship does exist and highlight further important avenues for future research.
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Affiliation(s)
- Sarah P. Coundouris
- School of Psychology, The University of Queensland, Brisbane, QLD, Australia
| | - Sylvain Hohn
- School of Economics and Finance, Queensland University of Technology, Brisbane, QLD, Australia
| | - Anup Basu
- School of Economics and Finance, Queensland University of Technology, Brisbane, QLD, Australia
| | - Uwe Dulleck
- School of Economics and Finance, Queensland University of Technology, Brisbane, QLD, Australia
| | - Julie D. Henry
- School of Psychology, The University of Queensland, Brisbane, QLD, Australia
| | - Nicolas Cherbuin
- Centre for Research on Ageing, Health and Wellbeing, Research School of Population Health, The Australian National University, Acton, ACT, Australia
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Boyle PA, Yu L, Mottola G, Innes K, Bennett DA. Degraded Rationality and Suboptimal Decision-Making in Old Age: A Silent Epidemic With Major Economic and Public Health Implications. Public Policy Aging Rep 2022; 32:45-50. [PMID: 35607367 PMCID: PMC9118064 DOI: 10.1093/ppar/prac003] [Citation(s) in RCA: 5] [Impact Index Per Article: 2.5] [Reference Citation Analysis] [What about the content of this article? (0)] [Affiliation(s)] [Key Words] [Grants] [Track Full Text] [Subscribe] [Scholar Register] [Received: 01/25/2022] [Indexed: 11/13/2022]
Affiliation(s)
- Patricia A Boyle
- Department of Psychiatry and Behavioral Sciences, Rush University Medical Center, Chicago, Illinois, USA
- Rush Alzheimer’s Disease Center, Rush University Medical Center, Chicago, Illinois, USA
| | - Lei Yu
- Rush Alzheimer’s Disease Center, Rush University Medical Center, Chicago, Illinois, USA
- Department of Neurological Sciences, Rush University Medical Center, Chicago, Illinois, USA
| | - Gary Mottola
- Financial Industry Regulatory Authority (FINRA) Investor Education Foundation, Washington, District of Columbia, USA
| | - Kyle Innes
- Financial Industry Regulatory Authority, Washington, District of Columbia, USA
| | - David A Bennett
- Rush Alzheimer’s Disease Center, Rush University Medical Center, Chicago, Illinois, USA
- Department of Neurological Sciences, Rush University Medical Center, Chicago, Illinois, USA
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Trueblood JS, Sussman AB. When a gain becomes a loss: The effect of wealth predictions on financial decisions. Cognition 2021; 215:104822. [PMID: 34246915 DOI: 10.1016/j.cognition.2021.104822] [Citation(s) in RCA: 0] [Impact Index Per Article: 0] [Reference Citation Analysis] [What about the content of this article? (0)] [Affiliation(s)] [Abstract] [Key Words] [Journal Information] [Subscribe] [Scholar Register] [Received: 09/15/2020] [Revised: 06/15/2021] [Accepted: 06/21/2021] [Indexed: 10/20/2022]
Abstract
When people make financial decisions, they need not only think about their current financial situation, but also about changes in future wealth. This work investigates people's beliefs about their future wealth and how these beliefs impact financial decisions. Using a joint experimental and computational cognitive modeling approach, we show that people's future beliefs serve as reference points when making investment decisions. These results are further supported by data from a large-scale cross-sectional survey (n = 4606) showing that people's beliefs about the future value of their assets are related to investment decisions between risky (i.e., stock market index) and safe (i.e., bond earning a fixed amount per year) options. In both the experiments and survey, we hypothesize that outcomes that are nominally stated as sure gains can become coded as losses due to belief-based reference points. This pattern leads to an increase in riskier choices across positive outcomes for individuals with optimistic beliefs about their future wealth.
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Affiliation(s)
| | - Abigail B Sussman
- University of Chicago Booth School of Business, United States of America
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Bangma DF, Tucha O, Tucha L, De Deyn PP, Koerts J. How well do people living with neurodegenerative diseases manage their finances? A meta-analysis and systematic review on the capacity to make financial decisions in people living with neurodegenerative diseases. Neurosci Biobehav Rev 2021; 127:709-739. [PMID: 34058557 DOI: 10.1016/j.neubiorev.2021.05.021] [Citation(s) in RCA: 12] [Impact Index Per Article: 4.0] [Reference Citation Analysis] [What about the content of this article? (0)] [Affiliation(s)] [Abstract] [Key Words] [Journal Information] [Subscribe] [Scholar Register] [Received: 06/24/2020] [Revised: 05/18/2021] [Accepted: 05/20/2021] [Indexed: 12/13/2022]
Abstract
Self and proxy reported questionnaires indicate that people living with a neurodegenerative disease (NDD) have more difficulties with financial decision-making (FDM) than healthy controls. Self-reports, however, rely on adequate insight into everyday functioning and might, therefore, be less reliable. The present study provides a comprehensive overview and meta-analysis of studies evaluating FDM in people living with an NDD. For this, the reliability of performance-based tests to consistently identify FDM difficulties in people living with an NDD compared to healthy controls is evaluated. Furthermore, the associations between FDM and disease severity, performances on standard measures of cognition and demographics are evaluated. All 47 included articles, consistently reported lower performances on performance-based FDM tests of people living with an NDD (including Alzheimer's disease, mild cognitive impairment, frontotemporal dementia, Parkinson's disease, multiple sclerosis or Huntington's disease) compared to healthy controls. The majority of studies, however, focused on Alzheimer's disease and mild cognitive impairment (k = 38). FDM performance appears to be related to cognitive decline, specifically in working memory, processing speed and numeracy.
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Affiliation(s)
- Dorien F Bangma
- Department of Clinical and Developmental Neuropsychology, University of Groningen, Groningen, the Netherlands; Department of Psychology, University of Amsterdam, Amsterdam, the Netherlands
| | - Oliver Tucha
- Department of Clinical and Developmental Neuropsychology, University of Groningen, Groningen, the Netherlands; Department of Department of Psychiatry and Psychotherapy, University Medical Center Rostock, Rostock, Germany; Department of Psychology, Maynooth University, National University of Ireland, Maynooth, Ireland
| | - Lara Tucha
- Department of Department of Psychiatry and Psychotherapy, University Medical Center Rostock, Rostock, Germany
| | - Peter P De Deyn
- Department of Neurology and Alzheimer Center Groningen, University Medical Center Groningen, Groningen, the Netherlands; Institute Born-Bunge, University of Antwerp, Antwerp, Belgium; Department of Neurology and Memory Clinic, Middelheim General Hospital (ZNA), Antwerp, Belgium
| | - Janneke Koerts
- Department of Clinical and Developmental Neuropsychology, University of Groningen, Groningen, the Netherlands.
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Koerts J, Bangma DF, Fuermaier ABM, Mette C, Tucha L, Tucha O. Financial judgment determination in adults with ADHD. J Neural Transm (Vienna) 2021; 128:969-979. [PMID: 33709182 PMCID: PMC8295146 DOI: 10.1007/s00702-021-02323-1] [Citation(s) in RCA: 0] [Impact Index Per Article: 0] [Reference Citation Analysis] [What about the content of this article? (0)] [Affiliation(s)] [Abstract] [Key Words] [MESH Headings] [Track Full Text] [Download PDF] [Journal Information] [Subscribe] [Scholar Register] [Received: 12/18/2020] [Accepted: 03/01/2021] [Indexed: 11/27/2022]
Abstract
ADHD has a debilitating influence on everyday functioning, including the capability to make financial decisions. The capability to make financial decisions is a multidimensional construct that includes financial knowledge, financial judgment, financial performance and related contextual factors. So far, the majority of studies in adults with ADHD focused on financial performance, while the other aspects of financial capability were less explored. The current study aims to partly bridge this gap by examining the ability of financial judgment in adults with ADHD. Thirty-nine adults with ADHD and 83 adults without ADHD were included. All participants were assessed with the Financial Competence Assessment Inventory (FCAI) and Financial Decision-Making Interview (FDMI) which both assess the four abilities of financial judgment, i.e., understanding, appreciation, reasoning and communication. The results show that adults with ADHD, compared to adults without ADHD, obtained significantly lower scores on understanding (according to the FCAI and FDMI). Furthermore, adults with ADHD showed a significantly lower appreciation, reasoning and communication (according to the FCAI) than adults without ADHD. In conclusion, adults with ADHD have difficulties with financial judgment especially with the ability to understand information that is relevant for a financial situation or transaction. Furthermore, adults with ADHD were found to have problems with appreciating, reasoning and communicating about practical information that partly relates to their own financial situation (as assessed with the FCAI). A careful assessment of financial capability in adults with ADHD, therefore, appears warranted in clinical practice.
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Affiliation(s)
- Janneke Koerts
- Department of Clinical and Developmental Neuropsychology, University of Groningen, Grote Kruisstraat 2/1, 9712 TS, Groningen, The Netherlands.
| | - Dorien F Bangma
- Department of Psychology, University of Amsterdam, Amsterdam, The Netherlands
| | - Anselm B M Fuermaier
- Department of Clinical and Developmental Neuropsychology, University of Groningen, Grote Kruisstraat 2/1, 9712 TS, Groningen, The Netherlands
| | - Christian Mette
- Department of Social Work and Education, Protestant University of Applied Sciences Bochum, Bochum, Germany
- LVR Hospital Essen, Essen, Germany
- Department of Psychiatry and Psychotherapy, Faculty of Medicine, University of Duisburg-Essen, Duisburg-Essen, Germany
| | - Lara Tucha
- Department of Psychiatry and Psychotherapy, University Medical Center Rostock, Rostock, Germany
| | - Oliver Tucha
- Department of Clinical and Developmental Neuropsychology, University of Groningen, Grote Kruisstraat 2/1, 9712 TS, Groningen, The Netherlands
- Department of Psychiatry and Psychotherapy, University Medical Center Rostock, Rostock, Germany
- Department of Psychology, Maynooth University, National University of Ireland, Maynooth, Ireland
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Kabir SO. Psychology and neuroscience applied to financial decision-making. Prog Brain Res 2020; 253:101-21. [PMID: 32771119 DOI: 10.1016/bs.pbr.2020.05.030] [Citation(s) in RCA: 0] [Impact Index Per Article: 0] [Reference Citation Analysis] [What about the content of this article? (0)] [Abstract] [Key Words] [Track Full Text] [Subscribe] [Scholar Register]
Abstract
All financial bubbles eventually burst and cause financial crises. In 2008 the US housing bubble burst, causing the global economy to suffer for 4 years. While the 2008 crisis received considerable attention because of its global impact, in the 21st century alone, there have been more than 10 financial crises. While economic, political and legal analysis of the crises have dominated academia, this dissertation argues that an interdisciplinary approach to financial market analysis is required to better understand why they occur. This argument is based on the idea, that the choices of traders are at the core of this issue, and consequently an understanding of trader decision-making behavior was required. Economic models of decision-making are unable to explain this behavior, as they assume decision-making to be an entirely rational process. To address this limitation, findings in neuroscience, psychology and biology are considered. Using this approach, this chapter outlines the role of different neural mechanisms, gut-feelings and hormonal states, that facilitate irrational behavior and increase a trader's susceptibility to partake in bubble markets.
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Sunderaraman P, Ho S, Chapman S, Joyce JL, Colvin L, Omollo S, Pleshkevich M, Cosentino S. Technology Use in Everyday Financial Activities: Evidence from Online and Offline Survey Data. Arch Clin Neuropsychol 2020; 35:385-400. [PMID: 31696205 PMCID: PMC7244884 DOI: 10.1093/arclin/acz042] [Citation(s) in RCA: 3] [Impact Index Per Article: 0.8] [Reference Citation Analysis] [What about the content of this article? (0)] [Affiliation(s)] [Abstract] [Key Words] [MESH Headings] [Grants] [Track Full Text] [Journal Information] [Subscribe] [Scholar Register] [Received: 04/15/2019] [Revised: 06/18/2019] [Accepted: 07/18/2019] [Indexed: 01/31/2023] Open
Abstract
OBJECTIVE Internet use and mobile devices permeate every aspect of our lives and are changing our financial habits. Assessment of financial decision-making (FDM) has not yet caught up to apparent changes in financial behavior. To modernize assessment methods and create current and comprehensive FDM frameworks, we first need to establish the most commonly used and most preferred methods of performing specific financial activities. METHOD Cross-sectional survey data were collected using an online platform and offline approaches (in person and by mail) (N = 234). The frequency of using technological (e.g., laptop) and non-technological (e.g., in-person banking) means of completing seven financial activities was assessed first, including Depositing checks, Reviewing bank statements, Keeping track of money spent, Transferring funds, Withdrawing cash, Paying bills, and Purchasing products online. Second, preference for technological versus non-technological methods was assessed. Finally, linear regression models examined associations between demographics and preference for technological methods for each financial activity. RESULTS The majority of respondents (77% online, 74% offline) used technology to perform various financial activities and preferred technological to non-technological methods for completing five out of the six financial activities. Increased preference for technological methods was associated with younger age for all the financial activities, and higher education was associated with reviewing bank statement and transferring funds. CONCLUSIONS Our survey findings provide empirical evidence for the changing nature of our financial habits. We discuss the implications of this change for researchers, clinicians, and the individuals themselves and emphasize the importance of modernizing FDM tools.
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Affiliation(s)
- Preeti Sunderaraman
- Cognitive Neuroscience Division, Taub Institute for Research on Alzheimer’s Disease and the Aging Brain Columbia University Medical Center, New York, NY, USA
- G.H. Sergievsky Center, Columbia University Medical Center, New York, NY, USA
- Department of Neurology, Columbia University Medical Center, New York, NY, USA
| | - Sarah Ho
- Cognitive Neuroscience Division, Taub Institute for Research on Alzheimer’s Disease and the Aging Brain Columbia University Medical Center, New York, NY, USA
| | - Silvia Chapman
- Cognitive Neuroscience Division, Taub Institute for Research on Alzheimer’s Disease and the Aging Brain Columbia University Medical Center, New York, NY, USA
- G.H. Sergievsky Center, Columbia University Medical Center, New York, NY, USA
| | - Jillian L Joyce
- Cognitive Neuroscience Division, Taub Institute for Research on Alzheimer’s Disease and the Aging Brain Columbia University Medical Center, New York, NY, USA
- G.H. Sergievsky Center, Columbia University Medical Center, New York, NY, USA
| | - Leigh Colvin
- Cognitive Neuroscience Division, Taub Institute for Research on Alzheimer’s Disease and the Aging Brain Columbia University Medical Center, New York, NY, USA
| | - Shalom Omollo
- Cognitive Neuroscience Division, Taub Institute for Research on Alzheimer’s Disease and the Aging Brain Columbia University Medical Center, New York, NY, USA
| | - Maria Pleshkevich
- Cognitive Neuroscience Division, Taub Institute for Research on Alzheimer’s Disease and the Aging Brain Columbia University Medical Center, New York, NY, USA
- G.H. Sergievsky Center, Columbia University Medical Center, New York, NY, USA
| | - Stephanie Cosentino
- Cognitive Neuroscience Division, Taub Institute for Research on Alzheimer’s Disease and the Aging Brain Columbia University Medical Center, New York, NY, USA
- G.H. Sergievsky Center, Columbia University Medical Center, New York, NY, USA
- Department of Neurology, Columbia University Medical Center, New York, NY, USA
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Abstract
Adult Protective Services (APS) professionals are often called on to assess decision-making capacity when investigating financial exploitation. Previous research found that in consecutive APS cases, a decision-making screening scale (LFDSS) also detected financial exploitation. The purpose of this study was to apply the clinical cutoff scores derived from the previous study to a new sample of APS cases. Using a sample of 105 participants, from APS workers across 5 counties this study investigated the clinical utility of the LFDSS to detect financial exploitation based on ratings by APS professionals using the scale. Results demonstrate that the LFDSS has excellent internal consistency and clinical utility properties. This paper provides support for use of the LFDSS as a reliable and valid instrument. Instructions for use of the LFDSS are included in the article, along with information about online support tools.
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Affiliation(s)
- Rebecca J Campbell
- a Institute of Gerontology and Department of Psychology , Wayne State University , Detroit , MI , USA
| | - Evan Gross
- a Institute of Gerontology and Department of Psychology , Wayne State University , Detroit , MI , USA
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