Small Cues Change Savings Choices

In randomized field experiments, we embedded one- to two-sentence anchoring, goal-setting, or savings threshold cues in emails to employees about their 401(k) savings plan. We find that anchors increase or decrease 401(k) contribution rates by up to 1.9% of income. A high savings goal example raises contribution rates by up to 2.2% of income. Highlighting a higher savings threshold in the match incentive structure raises contributions by up to 1.5% of income relative to highlighting the lower threshold. Highlighting the maximum possible contribution rate raises contribution rates by up to 2.9% of income among low savers.

The role of experience sampling and graphical displays on one's investment risk appetite and comprehension

Financial professionals have a great deal of discretion concerning how to relay information about the risk of financial products to their clients. This paper examines how different risk presentation modes influence how well investors understand the risk-return profile of financial products and how much risk they are willing to accept. We analyze four different ways of communicating risk: (i) numerical descriptions, (ii) experience sampling, (iii) graphical displays, and (iv) a combination of these formats in a ‘risk simulation’. Participants receive information about a risky and a risk free fund and make an allocation between the two in an experimental investment portfolio. We find that risky allocations are elevated in both the risk simulation and experience sampling conditions. Greater risky allocations are associated with decreased risk perception, increased confidence in the risky fund, and a lower estimation of the probability of a loss. Despite these favorable perceptions the risky fund, participants in the risk simulation underestimate the probability of a high gain and are more accurate on comprehension questions regarding the expected return and the probability of a loss. We find no evidence of greater dissatisfaction with returns in these conditions and observe a willingness to take on similar levels of risk in subsequent allocations. Our paper has important implications for the current debate surrounding how financial advisors assess the suitability of investment products for their clients

How much risk can I handle? The role of experience sampling and graphical displays on one's investment risk appetite and comprehension

Financial professionals have a great deal of discretion concerning how to relay information about the risk of financial products to their clients. This paper examines how different risk presentation modes influence how well investors understand the risk-return profile of financial products and how much risk they are willing to accept. We analyze four different ways of communicating risk: (i) numerical descriptions, (ii) experience sampling, (iii) graphical displays, and (iv) a combination of these formats in a ‘risk tool simulation’. Participants receive information about a risky and a risk free fund and make an allocation in an experimental investment portfolio. We find that risky allocations are elevated in both the risk tool simulation and experience sampling conditions. Greater risky allocations are mediated by decreased risk perception, increased confidence in the risky fund, and a lower estimation of the probability of a loss. Despite these indicators of optimism about the risky fund, participants in the risk tool simulation underestimate the probability of a high gain and are more accurate on comprehension questions on the expected return and the probability of a loss. We find no evidence of greater dissatisfaction with returns in these conditions and observe a willingness to take on similar levels of risk in subsequent allocations. Our paper has important implications for the current debate about regulating the communications between financial advisors and their clients

The Amount and Source of Millionaires’ Wealth (Moderately) Predict Their Happiness

Two samples of more than 4,000 millionaires reveal two primary findings. First, only at high levels of wealth—in excess of $8 million (Study 1) and$10 million (Study 2)—are wealthier millionaires happier than millionaires with lower levels of wealth, though these differences are modest in magnitude. Second, controlling for total wealth, millionaires who have earned their wealth are moderately happier than those who inherited it. Taken together, these results suggest that, among millionaires, wealth may be likely to pay off in greater happiness only at very high levels of wealth, and when that wealth was earned rather than inherited

The Meerkat Effect: Personality and Market Returns Affect Investors’ Portfolio Monitoring Behavior

Karlsson, Loewenstein and Seppi (2009) found that, following market downswings, investors are less likely to login to monitor their retirement portfolios. They concluded that, rather like (apocryphal) ostriches sticking their heads in the sand, investors avoid unpleasant information by reducing portfolio monitoring in response to news of negative market movement. We apply generalized non-linear mixed effects models to test for this selective information monitoring at an individual level in a new sample of active online investors. We see different behavior in this new sample. We find that investors increase their portfolio monitoring following both positive and daily negative market returns, behaving more like hyper-vigilant meerkats than head-in-the-sand ostriches. This pattern persists for logins not resulting in trades and weekend logins when markets are closed. Moreover, an investor personality trait – neuroticism - attenuates the pattern of portfolio monitoring suggesting that market–driven variation in portfolio monitoring is attributable to psychological factors

IN53D-04: Results from Evaluations of Gridded CrIS/ATMS Visualization for Operational Forecasting

No abstract availabl

Results from an Operational Demonstration of a Gridded CrIS/ATMS Product for Cold Air Aloft

No abstract availabl

The Limits to Moral Erosion in Markets: Social Norms and the Replacement Excuse

This paper studies the impact of a key feature of competitive markets on moral behavior: the possibility that a competitor will step in and conclude the deal if a conscientious market actor forgoes a profitable business opportunity for ethical reasons. We study experimentally whether people employ the argument "if I don’t do it, someone else will" to justify taking a narrowly self-interested action. Our data reveal a clear pattern. Subjects do not employ the "replacement excuse" if a social norm exists that classifies the selfish action as immoral. But if no social norm exists, subjects are more inclined to take a selfish action in situations where another subject can otherwise take it. By demonstrating the importance of social norms of moral behavior for limiting the power of the replacement excuse, our paper informs the long-standing debate on the effect of markets on morals