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Mark Fallak

Proud to not own stocks?

March 8, 2023

In an interview with the German business weekly Wirtschaftswoche, Luca Henkel, PhD candidate at the University of Bonn and research assistant at briq, points out that the negative image of stock owners may be responsible for low stock ownership rates. Below is an English translation of the interview (see original German version here).

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You conducted a study to find out people’s opinion on stockholders. Probably not a good one, right?

We started from the observation that many people, especially in Germany, do not participate in the stock market, and we investigated the role played by opinions and prejudices about stockholders. In our study, we show that people perceive stockholders very negatively and that these views have a concrete influence on their decisions to invest in the stock market. Specifically, because most people think that stockholders are more selfish and greedy than non-stockholders, they do not invest in the stock market themselves.

In your study, you examined groups from the Netherlands and the United States. What can be deduced from this for Germany?

In Germany, we lack concrete data so far, but we are currently working on that. Surveys among our students at the University of Bonn, however, seem to confirm the findings from the Netherlands. So in our country, too, there is a very negative perception of stockholders.

That fits in with the notion of the German “Aktienmuffel” who shuns stocks in general. But you write that in the U.S., with 86 percent of respondents, even more people perceive stockholders negatively than in the Netherlands (81 percent). How can that be explained?

The two figures are not fully comparable due to limitations in the U.S. data. In the Netherlands, we surveyed a representative population group. In the U.S., the responses were collected via an online panel. This is not representative of the population as a whole, and significantly fewer people took part there – only around 400, compared to almost 3,300 in the Netherlands. This difference explains parts of the results, which are surprising at first glance.

Stockholders have a bad image either way. But stocks have nevertheless become more popular as an asset class over the past ten years, when interest rates were exceptionally low for a long time. Does that show up in your data?

No, older people have neither more positive nor more negative attitudes toward stockholders than younger people. But older people are more likely to let these attitudes guide their behavior. So young people who are skeptical about stockholders show a greater willingness than older people to invest in the stock market.

Does people’s own wealth influence how they feel about stockholders?

Half of the richest 20 percent in the Netherlands own no stocks at all. Around 40 percent, in turn, have no significant assets to invest in the stock market. However, one’s own wealth does not play a decisive role in the question of how one feels about stockholders. The perception is predominantly negative in all wealth groups.

Does the negative perception only apply to stockholders? Are bondholders or real estate investors more popular?

We have not investigated this. What we can say, however, is that ETF investors or those who invest in sustainable financial products have a better reputation. But they are still perceived more negatively than non-stockholders.

Some seem ashamed of being a stockholder. Your respondents fibbed to you about that, didn’t they?

That’s right. In our research in the Netherlands, we had the opportunity to match the information on stock ownership in our survey with their tax records, which we believe provide a more realistic picture than surveys. The result of the comparison was astonishing: One-third of the respondents who, according to their tax records, owned stocks, reported to us that they did not own any. Conversely, only two percent of respondents whose tax records did not show stock ownership stated that they were stockholders.

So because people think negatively about shareholders, they fib and invest less in the stock market. How can this mechanism be overcome?

Our results suggest that, above all, the opinion about stockholders is a major obstacle to individual investing. Neobrokers have recognized this. They address precisely these stereotypes with their advertising campaigns, in which they show everyday people on the couch or on the train trading stocks. The idea is to get away from the image of the stockholder seen in Wall Street movies. Lack of financial knowledge, which is often cited as the main reason for low stock ownership rates, is not the main problem, according to our data.

Filed Under: News

Morality and political ideology

February 16, 2023

A large-scale multinational study shows that differences in universalism are a stronger predictor of variations in support for various policy views than traditional political economy variables such as income or equity-efficiency preferences.

Moral universalism is defined as the extent to which people exhibit the same level of altruism and trust towards strangers as towards in-group members. Universalism focuses on how a person’s altruism or trust changes based on the distance between them and the group they are interacting with, rather than one individual’s overall level of altruism or trust. Therefore, a universalist places less emphasis on group- or place-based identities than communitarians do.

Animated video about the study created by econimate

The study by Benjamin Enke, Ricardo Rodríguez-Padilla, and briq Research Director Florian Zimmermann, published in the Review of Economic Studies, provides descriptive evidence that moral universalism predicts the prevailing ideological clusters across many rich Western countries. The analysis is based on internet surveys with a total of about 11,000 respondents from nationally representative samples in the United States, Australia, Germany, France, and Sweden.

The researchers developed a new method for measuring universalism. Participants are given a hypothetical $100 and are asked to divide it between two equally rich individuals: (i) a randomly selected member of a specific social (in-)group who lives in their own country of residence and (ii) a randomly selected person who lives in their own country of residence. Each participant is required to make multiple choices with varying types of (in-)group members. For example, in one question, a U.S. participant is asked to split a hypothetical $100 between a member of their extended family and a randomly selected person from the United States. The amount given to the random stranger across the different decisions makes up the universalism measure.

Structure of political ideology in Western countries

As a first step, the authors use their rich survey data to study patterns in political views. The data suggests that individuals’ policy views in affluent Western nations are highly correlated, despite notable variations in their electoral systems, political parties, and demographic makeup. People in one cluster generally desire government expenditure on foreign aid, affirmative action, environmental protection, welfare, and universal health care, while people in the other cluster support government spending on the military, police and law enforcement, and border control. But what determines who belongs to which cluster?

Figure A. The correlation between individuals’ policy views in affluent Western nations can be visualized through the use of principal component analysis, which plots the factor loadings of desired shares of overall government spending. The results consistently show that border control, military, and law enforcement receive negative weights, while foreign aid, affirmative action, environmental conservation, welfare programs, and universal healthcare consistently receive positive weights across all countries.

Universalism and policy views

The study documents that heterogeneity in moral universalism plays a central role in shaping the specific structure of policy views described above. Universalism is highly correlated with the respondents’ self-reported ideology on a left-vs.-right scale (see Figure B). Further, across all countries, the study found a clear negative correlation between universalism and support for policy areas typically associated with right-wing ideologies, such as border control, military spending, and law enforcement. Conversely, universalism was found to have a positive correlation with support for the four policy areas associated with left-wing ideologies.

Universalism proves to be a more significant factor in understanding individuals’ policy views and political ideology than traditional economic factors such as income, wealth, or beliefs about government efficiency and equity-efficiency preferences.

Figure B

The findings of this study suggest a novel explanation for the formation of political ideologies in Western societies. The degree to which individuals exhibit the same level of altruism and trust towards out-group members as they do towards in-group members is a powerful predictor of their policy views and can help explain the grouping of individuals into distinct ideological clusters.

Filed Under: News

Peter Andre receives Distinguished CESifo Affiliate Award

December 7, 2022

Peter Andre, briq postdoctoral fellow since January, has been selected as the winner of this year’s Distinguished CESifo Affiliate Award in the area of behavioral economics. The prize is funded by the international CESifo research network based in Munich and aims at identifying promising young researchers. Last year’s winner in the field behavioral economics was briq postdoc Suanna Oh (see briq newsroom article). Previous winners include briq research director Florian Zimmermann and briq research affiliate Matt Lowe.

Peter’s paper “Shallow Meritocracy” investigates whether people consider other people’s circumstances when judging their merits and accomplishments. Meritocracies aspire to reward hard work but promise not to judge individuals by the circumstances into which they were born. However, the choice to work hard is often shaped by individual chances and incentives resulting from one’s personal situation.

The award-winning study shows that people, in fact, often neglect personal circumstances and their effect on life choices when evaluating another person’s merits. In an experiment, US participants judge how much money workers deserve for the effort they exert. Unequal circumstances discourage some workers from working hard. Nonetheless, participants reward the effort of disadvantaged and advantaged workers identically, regardless of the circumstances under which choices are made.

Additional experiments identify an important underlying mechanism. Individuals understand that choices are influenced by circumstances. But, as people do not know what exactly would have happened on a level playing field, individuals base their merit judgments on the only reliable evidence they possess: observed effort levels.

See also the video interview: Three questions with Peter Andre

Filed Under: News

briq Climate Workshop

November 24, 2022

Can behavioral insights contribute to better climate policy? How do behavioral motives and biases interact with market institutions? And what are the consequences of market-based solutions in unequal societies? To discuss and explore these questions, the briq Climate Workshop brought together researchers from psychology, behavioral economics, environmental economics, theoretical microeconomics, climate finance, and macroeconomics.

Below is a brief summary of the topics covered (see the workshop program for a full list of presentations).

Experience of extreme weather events: Eric Johnson presented a meta study showing that current or recent weather experiences can influence concerns about global warming. Elke Weber‘s work showed that witnessing extreme weather events can even reduce the political partisan gap in climate attitudes. David Huffman explored the effects of weather on economic and social preferences, and Johannes Stroebel explained how the local reaction of investors to local weather events can be used to derive a climate risk hedge portfolio.

Preferences: Frikk Nesje argued that the weight a social planner places on future welfare increases if people’s preference to benefit future generations is generalized above their descendants, an idea he refers to as “cross-dynastic intergenerational altruism”. Klaus Schmidt explained under which circumstances carbon emission trading interferes with the private motivation of households, firms, or states.

Attention: Anna Schulze Tilling explored how food labels facilitate climate-conscious food choices, in particular through an attention mechanism. Matthias Rodemeier discussed how attention to information about energy efficiency can mute price sensitivity and thus interfere with the incentive effect of subsidies. 

Other topics included the behavioral principles of cooperation (Simon Gächter), peer effects (Sebastian Tebbe), the unequal effects of carbon taxation (Diego Känzig), the consequences of wealth inequality for the optimal taxation of externalities (Philipp Strack), and people’s misperception of their marginal impact on global warming (Christoph Semken). briq researcher Peter Andre presented global evidence on people’s willingness to act against climate change—brand new results from a novel briq research project.

Filed Under: News Tagged With: climate

What Germans think and do about climate change

September 1, 2022

The latest four editions of the briq policy monitor use a large representative sample of adults in Germany to document their attitudes towards climate change and the individual willingness to engage in climate protection, measured through an incentivized donation decision and questions related to climate-friendly behaviors.

The results are currently available in German language only – an English version will follow shortly.

Filed Under: News

Ulrike Malmendier joins German Council of Economic Experts

August 15, 2022

briq Visiting Professor Ulrike Malmendier has been appointed to the German Council of Economic Experts in August 2022. This body of independent experts, consisting of five members appointed for five years, is mandated by the federal government to present a periodic assessment of Germany’s macroeconomic development. Their expertise is meant to help both economic policymakers and the general public make informed decisions.

Ulrike Malmendier is among the top five percent of the world’s most cited economists. After completing a doctorate in Law at the University of Bonn, she received her doctorate in Business Economics from Harvard University in 2002. Her main research interests are in behavioral economics and behavioral finance, also including corporate finance, household finance, economics of organizations, and contract theory. She is currently a Professor of Finance and Economics at the University of California, Berkeley, and Chair of the briq Scientific Council.

Read more (in German):

  • SZ: „Die Weisen werden weiblich“
  • FAZ: Interview mit Ulrike Malmendier
  • Wiwo: Sind Ältere die besseren Zentralbanker?

Filed Under: News

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