2019 Academic Research Colloquium for Financial Planning and Related Disciplines

LIST OF Accepted Papers

Lazy Prices
Lauren Cohen
Harvard Business School
Harvard University

Christopher Malloy
Harvard Business School
Harvard University

Quoc Nguyen
DePaul University

Abstract
Using the complete history of regular quarterly and annual filings by U.S. corporations from 1995-2014, we show that when firms make an active change in their reporting practices, this conveys an important signal about future firm operations. Changes to the language and construction of financial reports also have strong implications for firms€™ future returns: a portfolio that shorts changers and buys non-changers earns up to 188 basis points in monthly alphas (over 22% per year) in the future. Changes in language referring to the executive (CEO and CFO) team, regarding litigation, or in the risk factor section of the documents are especially informative for future returns.

We show that changes to the 10-Ks predict future earnings, profitability, future news announcements, and even future firm-level bankruptcies. Unlike typical under reaction patterns in asset prices, we find no announcement effect associated with these changes–with returns only accruing when the information is later revealed through news, events, or earnings–suggesting that investors are inattentive to these simple changes across the universe of public firms.

ETF Short Interest and Failures-to-Deliver: Naked Short-Selling or Operational Shorting?
Richard Evans
Darden School of Business
University of Virginia

Rabih Moussawi
Villanova School of Business
Villanova University

Michael Pagano
Villanova School of Business
Villanova University

John Dedunov
Villanova School of Business
Villanova University

Abstract
ETFs constitute 10% of U.S. equity market capitalization but over 20% of short interest and 78% of failures-to-deliver. While this disproportionate share of short activity has raised concerns about excessive shorting/naked short-selling of ETFs, we identify an alternative source of ETF shorting related to creation/redemption activities. This source, operational shorting, is associated with improved liquidity, but it is also associated with increased systemic risk. In exploring possible mechanisms for this risk relationship, we document a commonality in operational shorting across ETFs that share the same authorized participant and the financial leverage of the authorized participant appears to amplify this commonality.

Policy Uncertainty and Household Stock Market Participation
Vikas Agarwal
J. Mack Robinson College of Business
Georgia State University

Hadiye Aslan
J. Mack Robinson College of Business
Georgia State University – Department of Finance
Lixin Huang
J. Mack Robinson College of Business
Georgia State University

Honglin Ren
J. Mack Robinson College of Business
Georgia State University

Abstract
Using a unique micro-level panel dataset, we relate households stock market participation to policy uncertainty. We show that households significantly reduce their equity participation during periods of high policy uncertainty, identified by gubernatorial elections. The magnitude of the participation cycles varies with risk aversion, employment risk, and cost of processing information. In certain situations, election-triggered drop in participation is followed by a partial increase in post-election years as the uncertainty over policy outcomes subsides, reflecting a real distortion. Our findings suggest that policy uncertainty is an important channel through which the political process creates a negative externality in financial markets.

Do Brokerages Benefit from All-Star Females?
Sima Jannati
University of Missouri-Columbia

Abstract
This paper documents a positive correlation between the representation of senior female analysts and outcome of brokerages. A larger number of all-star females in a brokerage increases the future size and performance of the brokerage. Moreover, analysts who work in brokerages with at least one all-star female experience a higher (lower) subsequent likelihood of promotion (demotion). I address endogeneity concerns regarding the presence of all-star females in a brokerage, using deviation from the steady-level female composition in the brokerage as an instrumental variable. Finally, a higher representation of all-star females in male-dominated brokerages, narrows the promotion gap for other female analysts.

The Causal Mechanism of Financial Education: Evidence from Mediation Analysis
Fenella Carpena

Bilal Zia
World Bank – Development Research Group (DECRG)

Abstract
This paper uses a field experiment in India with multiple financial education treatments to investigate the causal mechanisms between financial education and financial behavior. Focusing on the mediating role of financial literacy, we propose a broader definition of financial knowledge that includes three dimensions: numeracy skills, financial awareness, and attitudes towards personal finance. We then employ causal mediation analysis to investigate the proportion of the treatment effect that can be attributed to these three channels. Strikingly, we find that numeracy does not mediate any effects of financial education on household outcomes.

For simple financial actions such as budgeting, both awareness and attitudes serve as critical pathways, while for more complex financial activities such as opening a savings account, attitudes play a more prominent role. These findings underscore the importance of changing perceptions about financial products and services as a vital mechanism for the success of financial education.

Chasing Returns in Retirement Accounts: Do Learning, Literacy, and Experience Matter?
Jonathan Huntley
Wharton School
University of Pennsylvania

Valentina Michelangeli
Bank of Italy

Felix Reichling
Wharton School
University of Pennsylvania

Abstract
We investigate the effects of financial literacy and learning on rationality in household savings decisions by studying contributions to solo 401(k) plans. Sponsors of solo 401(k) plans are typically more financially sophisticated and wealthier than the typical 401(k) account owner and invest in plans with fewer restrictions. In accordance with previous literature, we find a positive relationship between high returns and an increase in contributions, which we refer to as “chasing returns.” Specifically, we find that chasing returns is mostly driven by investors with returns in the top decile, and this behavior does not diminish as investing experience increases. Unlike some previous studies, we conclude that chasing returns does not abate with additional learning or high levels of financial sophistication. Changes in expected returns reflecting investors’ personal experience – likely driven by overconfidence – is consistent with our observed behaviors.

Effects of Over and Under-Confidence on Asset Holdings and Net Worth
Su Hyun Shin
University of Alabama

Andrew Hanks
Ohio State University

Abstract
Previous measures that proxy for overconfidence tend to deal with perceptions about knowledge pertaining to economic conditions and financial markets since the research often deals with economic and financial decisions. Our objective is to contribute to this literature by considering a more general proxy of overconfidence. We do so by operationalizing measures of subjective and objective cognitive ability in the Health and Retirement Study to estimate a proxy for over confidence. This proxy is the remaining variation of subjective cognition not explained by an objective cognitive score. We then explore differences in financial asset holdings and overall net worth holdings by people we characterize as over or under-confident, and those of average confidence. We find that overconfident individuals are less likely to hold most types of financial assets, and have lower net worth than average and under-confident individuals. Conditional on ownership, overconfident individuals hold a greater share of financial wealth in liquid assets and other financial assets. Under-confident individuals invest similarly to people with average confidence.

Advertising Exposure and Portfolio Choice: Estimates Based on Sports Sponsorships
Ioannis Branikas
Lundquist College of Business
University of Oregon

Abstract
Product market advertising by raising the awareness of a company’s brand is thought to increase the demand for a company’s stock as well as its products. I construct a dataset of publicly traded sports sponsors in the US and develop an instrument for investor exposure to advertising via these sponsorships. I show that investors living in a city where local sports teams are sponsored by a given company, local or non-local, are more likely to purchase stocks in that company. The portfolio effects from sports sponsorship are large and suggest that advertising is more important than even local bias.

Financially Sound Households Use Financial Planners, Not Transactional Advisors
David Blanchett
Morningstar Investment Management LLC

Abstract
Financial advisors can add significant value for clients, but empirical evidence documenting this effect is mixed. This paper explores how household financial decision-making varies by four sources of information: financial planners; transactional financial advisors; friends; or the Internet. Five aspects of decision-making are explored: portfolio risk levels; savings habits; life insurance coverage; revolving credit card balances; and emergency savings using the six most recent waves of the Survey of Consumer Finances (2001 to 2016). We find that households working with a financial planner are making the best overall financial decisions, followed by the Internet, while those working with a transactional advisor are making the worst financial decisions. We cannot conclude that the financial planner is the reason these households are making the best financial decisions due to potential selection bias issues; however, these findings do suggest the potential value of financial advice may vary significantly based on the nature of the financial engagement and that households are likely better off working with an advisor that is more comprehensive (e.g. a financial planner) than transactional in nature.

The Effect of Genetics on Risk Preferences and Household Financial Decisions
Vickie L. Bajtelsmit
Colorado State University

Lisa Lipowski Posey
Department of Insurance & Real Estate
Pennsylvania State University

Abstract
This study investigates how genetics influence risk preferences and financial decisions. We expand on existing theoretical models to show that risk preferences that depend on genetic differences can explain non-expected utility maximizing behavior. We test these results using several waves of the Health and Retirement Study, which includes a rich set of information on households including biomarkers and genetic data for a large portion of the sample. We measure risk preferences using established methodologies (see Kimball et al. 2008) and create an alternative measure of risk preferences that incorporates polygenic scores estimated from the raw genetic data. We then estimate the effect of risk preferences using these alternative measures on risk-related household decisions such as insurance purchase decisions and retirement saving, and evaluate the relative contribution that risk preferences play in determining household financial well-being.

Two-Factor Risk Preference for Investment Market and Credit Card Risk
Patrick Payne
College of Business
Western Carolina University

Sarah Asebedo
Texas Tech University

Abstract
This study proposes a new two-factor risk preference metric and assesses its effectiveness in predicting financial satisfaction under two risk domains: investment market risk and credit card risk. The factors in our two-factor assessment are risk tolerance and financial self-efficacy (FSE), both of which have other theoretical and empirical support as measures of risk attitudes. We explore a range of specifications for the two-factor risk preference (TRP) metric and find it to be effective in predicting financial satisfaction under uncertainty. Within the TRP framework, FSE emerged as a robust predictor of the financial satisfaction of credit card users regardless of respondent’s risk tolerance level; similar results were found for investment market equity owners. Overall, this study presents evidence that suggests risk tolerance and FSE capture different aspects of risk attitudes and are more effective at predicting risk preferences together than either one alone. Results suggest that financial planners can more accurately predict client responses to risk by assessing client FSE and risk tolerance levels. Financial planners can then improve client service by using the assessment results as a basis for investment portfolio allocation and credit market participation recommendations.

A Day Late and a Dollar Short: Liquidity and Household Formation among Student Borrowers
Constantine Yannelis
Leonard N. Stern School of Business
New York University

Adam Isen

Sarena Goodman
Board of Governors of the Federal Reserve System

Abstract
The federal government encourages human capital investment through lending and grant programs, but resources from these programs may also finance non-education activities for liquidity-constrained students. To explore this possibility, we use administrative data for federal student borrowers linked to tax records and a sharp discontinuity generated by the timing of a student’s 24th birthday, which induces a jump in federal support. We estimate a persistent increase in homeownership, with larger effects among those most financially constrained, and lagged marriage and fertility effects. Analysis of earnings, savings, and heterogeneity strongly favors liquidity over human capital or wealth in explaining the results.

Examining the Conventional Wisdom of Municipal Bond Investments and Use in Financial Planning
Timothy M. Todd
Liberty University School of Law
Liberty University

Maurice MacDonald
Kansas State University

Stuart Heckman
Kansas State University

Abstract
Municipal bond income is exempt from federal taxation; municipal bonds, therefore, offer an advantage over traditional investments that are taxed. The conventional wisdom surrounding municipal bonds is that they are used as a tax minimization device for those with high incomes and used as a safer investment option (because they are backed by local governments). Using the 2016 Survey of Consumer Finances, this study examines this conventional wisdom empirically as well as other aspects of municipal bond ownership. This study indicates that investments in municipal bonds are associated with increased levels of investment income, higher net worth, lower levels of willingness to take financial risks, and use of a financial planner or accountant. Interestingly, though, no significant relationship was found between municipal bond investors and subjective financial knowledge, indicating a possible information effect of using professional advisors.

Age Differences in Risk Tolerance and Risk Domains
Muna Alabed

Charlene M. Kalenkoski
Texas Tech University

Abstract
The paper investigates whether individuals risk tolerance changes as they age. Risk is a key factor determining investment decisions and outcomes, and hence has a major economic impact on individuals lives. This paper investigates the hypothesis that individuals typically become less risk tolerant as they grow older. More specifically, it investigates individual’s personal perceptions of their own risk attitudes with respect to different risk domains, these are health, money, career, safety, and leisure domains. The study uses data on the degree of risk tolerance with respect to these five different domains, in addition to individual’s financial portfolio risk to investigate whether decline in risk tolerance is associated with aging and whether this hypothesis is true regardless of the risk-specific domain. The analysis uses longitudinal data from the German SAVE panel (2005 – 2013) and, to the best of the researcher’s knowledge, is the first to offer empirical evidence based on longitudinal data. The results of this paper suggest that, generally, older individuals experience a decline in their risk tolerance in every risk domain as they age, all else equal. 

Location Choice, Portfolio Choice
Ioannis Branikas
University of Oregon, Lundquist College of Business, Department of Finance

Harrison G. Hong
Graduate School of Arts and Sciences, Department of Economics
Columbia University

Jiangmin Xu
Department of Finance
Peking University

Abstract
Households hold undiversified stock portfolios of firms headquartered near their city of residence. Leading explanations like the familiarity heuristic assign a causal role for proximity. The literature neglects that distance is endogenous: households may locate based on unobservables such as optimism about a city’s economic prospects, which can be correlated with latent local-stock demand. We propose as instruments that older households closer to retirement prefer to locate in areas with recreation and mild climate for non-pecuniary reasons. Causal estimates are significant but much smaller than those in the literature. Location choices have a larger impact on household portfolios than proximity.

Religious Beliefs, Religious Culture, and Household’s Investment Decisions
Hohyun Kim
Korea Advanced Institute of Science and Technology (KAIST)

Kyoung Tae Kim
University of Alabama

Seung Hun Han
Department of Management Science
Korea Advanced Institute of Science and Technology (KAIST)

Abstract
This paper examines whether and how own religious beliefs and local religious cultures affect US household’s investment decisions. Catholics and Protestants are less likely to participate in stock markets than are nonreligious households, while Catholics are more likely to participate than Protestants. Moreover, households in areas with a higher Catholic-Protestant ratio are more likely to participate in stock markets. Further, households with a higher local Catholic-Protestant ratio tend to hold riskier stock portfolios through market-sensitive and small stocks, and stocks with high idiosyncratic risks. We suggest that religion is a significant determinant of household’s risk preferences in investment.

What are the U.S. Retirement Population Success Rates When Using HECM?
Chia-Li Chien
School of Business
California Lutheran University

Abstract
This research quantifies retirement success rates in the U.S. retiree population overall and within demographic and socioeconomic cohort groups and measures the change in success rates when specific retirement strategies are used. Success means that the retiree maintains a positive portfolio balance at death, with survival probabilities used to create a weighted average about the relative percentage of people surviving to each age up to 119. The demographic and socioeconomic cohort groups include singles or couples households, state of residence, age and net worth. The retirement strategy uses home equity assets through use of home equity conversion mortgage (or HECM), if qualified. This study emulates the process of determining the success rates of portfolios of financial assets from Cooley, Hubbard, and Walz, (1999) assuming potential survival to age 119.

The study simulates success rates by using use household survey data, the Census Bureau’s Survey of Income and Program Participation by adding home equity conversion mortgages (HECM) as a retirement strategy. The study found that single households have the most improvement when HECM retirement strategy is used. The HECM strategy is most effective in households with a net worth range of $100,000 to $499,999.

Are Financial Plans Orchestrated by Mental Accounts? An Empirical Investigation into the Role of Mental Accounting on Personal Financial Planning
Mousumi Mahapatra
National Institute of Technology, Durgapur

Jayasree Raveendran
Institute of Public Enterprise (IPE)

Anupam De
National Institute of Technology, Durgapur

Abstract
Given the increasing relevance of Behavioral Economics in understanding decisions, this paper has analyzed the role of Mental Accounting (MA) in influencing Personal Financial Planning (PFP) decisions of Indian Households. Using the components put forth by the behavioral life cycle theory, MA variables are identified and validated. Individual tendencies for engaging in PFP are captured through identified dimensions. A significant influence of MA on PFP of investors is being empirically established in the study and the implications for business research are put forth. Using PLS-SEM technique, a structured questionnaire exclusively designed for this purpose has been analyzed on a total of 310 responses. The analysis strategy involved three-stage approach through establishing structural and path relationship between MA and PFP, including second order factoring to corroborate validations

Success and Satisfaction of Women in Financial Planning
Jim Pasztor
College for Financial Planning

Aman Sunder
College for Financial Planning

Rebecca Henderson
College for Financial Planning

Abstract
There has been a lot of discussions, research, and initiatives about different aspects that relate to building the financial planning profession by attracting and retaining talented financial planners. An acknowledged problem and challenge for the profession is lack of ethnic and gender diversity. Surveys have shown that many people view financial planning as primarily a profession of white males. We know that the number of women financial planners has remained stagnant for the past decade and are curious as to reasons behind this lack of growth, especially since there is no evidence that women lack the skills or traits necessary to be a successful planner. Previous research has found evidence of sexism in the profession which includes significantly lower compensation for women, and different treatment of women by their fellow planners and employers.

We surveyed 224 experienced professional financial planners to analyze their feelings of satisfaction and success and how these feelings related to their gender, size of practice, education, personality traits, age, and years of experience. The women in our sample were equivalent or better than men with regards to education, experience, personality (the Big-Five Personality Traits), and CFP® certifications. However, we found that professional career satisfaction was surprisingly higher for women if they worked for a solo practice rather than for a large firm where both men and women felt more successful.

The Timing of Early-life Family Income and Adult Obesity
Yilan Xu
Department of Agricultural and Consumer Economics
University of Illinois at Urbana-Champaign

Tansel Yilmazer
Ohio State University

Abstract
This paper investigates how early-life exposure to economic adversity is associated with adult health, with a focus on examining the timing effects of early-life family income on adult obesity. In specific, family income profiles during childhood (age 0-5), early adolescence (age 6-11), and late adolescence (age 12-17) are correlated to obesity observed by age 30, 35, 40, and 45, controlling for the effect of parental permanent income, own adult income and other demographic factors. The parent-child information in the Panel Study of Income Dynamics (PSID) data is used for this study. The preliminary results suggest evidence that family income in children’s late adolescence but not in other early-life stage is consistently associated with adult obesity. The on-going research focuses on three efforts: 1. modeling the economic adversity by the persistence of financial strain; 2. differentiating the correlations by SES; and 3. exploring the underlying mechanisms.

Understanding the Correlation between Alzheimer’s Disease Polygenic Risk, Wealth, and the Composition of Wealth Holdings
Su Hyun Shin
University of Alabama

Dean R. Lillard
Department of Human Sciences
Ohio State University

Jay Bhattacharya
Center for Primary Care and Outcomes Research
Stanford University

Abstract
We investigate whether and to what extent people save differently when they have a greater or smaller genetic risk of developing Alzheimer’s Disease. Using a nationally representative data from the 1992-2014 Health and Retirement Study (HRS), we find that genetic predisposition is not an exogenous assignment to explain older individual’s wealth holdings. Relative to people with lower polygenic score (PGS), people with higher Alzheimer Disease polygenic risk hold roughly 8 percent more wealth in hands-off assets and around 15 percent less wealth in hands-on assets. We further explore three hypotheses. We hypothesize that people with different PGS save/allocate wealth in different ways (i) because they know their polygenic risk of developing Alzheimer Disease and related dementia, (ii) because they have lower cognitive capacity, or (iii) because the genome-wide association studies (GWAS) process that generated the Alzheimer Disease PGS failed to fully account for the aging process. Our extended model results show that the first two hypotheses do not account for the observed correlation. Consistent with the third hypothesis, the interaction between age and the Alzheimer Disease PGS does explain the correlation between genetic traits and asset holdings.

Predicting Financial Risk Taking Behavior: A Comparison of Questionnaires
John Grable
Department of Financial Planning, Housing, & Consumer Economics
University of Georgia

Amy Hubble
University of Georgia

Kruger, Michelle
University of Georgia – College of Family and Consumer Sciences, Students

Melissa Visbal

Abstract
The purpose of this study was to compare and contrast the predictive validity of risk tolerance questionnaires. The tested questionnaires represented measures derived from economic and psychometric theory. It was determined that questionnaires based on economic theory had similar predictive power, implying that both measures provided some degree of reliability across measures. Only the psychometric theory-based risk tolerance measure was found to be correlated to other indicators of risk tolerance. Specifically, scores on the psychometric scale were correlated with knowledge of casino games, the likelihood of gambling, financial decision making experience, and investing knowledge, as well as participant holdings of cash and equities. A key finding from this study is that the psychometric questionnaire was the only measure to predict who was more likely to participate in a risk taking game where the outcomes of the game were unknown and potentially negative. Results from this exploratory study suggest that a questionnaire developed using psychometric theory appears to offer superior predictive ability of financial risk taking, at least when compared across the measurement techniques examined in this study.

Present Bias and Financial Behavior
Jing Jian Xiao
University of Rhode Island

Nilton Porto
University of Rhode Island

Abstract
Present bias is an important term in behavioral finance that is derived from the concept of self-control. Empirical research finds that present bias is associated with undesirable spending, borrowing, and saving behavior. Unlike previous research that focuses on one domain of financial behavior, the purpose of this study is to examine associations between present bias and a set of financial behaviors in various domains such as spending, borrowing, saving, and money management. With data from a national urban sample in China, results show that some behavioral patterns are consistent with theoretical predictions that present biased consumers are more likely to spend now and less likely to save. The findings have implications for further research of present bias to better understand this important concept and for financial advisors to better serve their clients.

On the Investment Credentials of Bitcoin: A Cross-Currency Perspective
Prateek Bedi
Department of Financial Studies
University of Delhi

Tripti Nashier

Abstract
Bitcoin has grown popular as a financial asset and outperformed all asset classes in the recent times. This paper examines the diversification capabilities of Bitcoin for a global portfolio consisting of investments across six major asset classes. Considering a sample period from July 2010 to January 2018, we perform portfolio optimisation using Modified CVaR and standard deviation as measures of risk. We employ three investment strategies namely long-only, constrained & equally-weighted to construct optimal portfolios denominated in five major currencies which dominate Bitcoin trading volumes. Results suggest that inclusion of Bitcoin leads to a proportionately higher increase in portfolio return than in portfolio risk for all currencies. We show that risk-adjusted returns of optimal portfolios including Bitcoin are significantly higher as compared to portfolios without Bitcoin across all investment strategies. The average weight of Bitcoin in the portfolios is high for all currencies due to low correlation of Bitcoin with other assets. Taken together, our findings suggest that Bitcoin is a valuable asset from the perspective of portfolio diversification. The study contributes to the literature on financial evaluation of Bitcoin by showing that diversification gains offered by Bitcoin are robust to various currencies, risk measures and investment strategies used to construct optimal global portfolios.

The Way Consumers and Clients Respond to Financial Conversations: Investigation with Measurement of EEG signals
Wookjae Heo
South Dakota State University

Abstract
This study investigated the way clients responded to financial conversations by employing quantitative EEG signal analysis. The research study proposed to address the following questions: (a) In what way does a financial conversation influence brain waves? (b) In what way does a financial conversation influence consumers general activity? and (c) In what way is financial risk tolerance associated with changes in brain waves in different situations? The results showed that: (a) Having a financial conversation affects a person behavioral responses unconsciously; (b) Having a financial conversation affects a consumer/client subsequent activity, and (c) Professional financial consultants should consider risk tolerance before having a financial conversation with clients.

The Effect of Demographic Characteristics and Economic Characteristics on an Individual’s Financial Risk Tolerance
Christina Wang
University of Missouri- Columbia

Abstract
This study was designed to build a comprehensive model of financial risk tolerance using a number of demographic and economic variables from a large, nationally representative dataset, the Survey of Consumer Finances 2016. Linear regression was used to confirm relationships between education, marital status, income, employment status, financial knowledge, and age with subjective financial risk tolerance. All variables were found to be significant determinants of financial risk tolerance, with education, income, and financial knowledge showing positive relationships and age showing a negative relationship. Single males were found to be more risk tolerant than married couples, followed by never married females and previously married females. The self-employed demonstrate higher risk tolerances than those who are employed by someone else, followed by those who are not employed. Finally, whites are shown to have higher risk tolerance than blacks and Hispanics, with other races being insignificantly different from whites.

Relationships among Financial Ability, Financial Independence, and Well-Being of Emerging Adults: Does Personality Matter?
Lu Fan
University of Missouri

Swarn Chatterjee
University of Georgia

Jinhee Kim
Department of Family Science
University of Maryland

Abstract
This paper uses the most recent wave of the Panel Study of Income Dynamics and its Transition to Adulthood supplement to examine whether personality influences financial ability and financial independence of emerging adults. Furthermore, the study examines whether personality types, financial ability and financial independence are associated with psychological as well as emotional well-being of emerging adults. The results indicate that personality is associated with both perceived financial ability, and financial independence of emerging adults. Our findings also suggest that perceived financial ability plays an important role in the emotional and psychological well-being of emerging adults. The findings from this study have implications for financial planners working with younger clients, particularly the millennials. Implications for researchers, scholars, and policy makers are also included.

Equity Allocations in Retirement Accounts among Young Adults
Stuart Heckman
Kansas State University

Abstract
Financial decisions in young adulthood have lasting financial implications for consumer well-being. The importance of these early decisions is especially clear in retirement planning. Therefore, this study examines equity allocations in retirement accounts of young adults by using two datasets from the Federal Reserve Board: The Survey of Consumer Finances and the Survey of Household Economic Decision-making. The preliminary results indicate that nearly 58% of young adults do not have a retirement account and the average equity allocation among those who do have retirement accounts is about 55%. Furthermore, only about 37% of young adults indicate that they are comfortable making investment decisions in their employer-sponsored retirement accounts. Next steps and implications for financial planners are discussed.

Victim Characteristics of Investment Fraud
Steven Lee
The American College of Financial Services

Benjamin F. Cummings
The American College of Financial Services

Jason Martin
Swarthmore College

Abstract
Investment fraud constitutes a major problem in the United States. While several studies have investigated various aspects of fraud, none have analyzed victim characteristics of investment fraud. This study posits five fraud languages that, when used by fraudsters, shut down the perceived need to conduct due diligence in their victims: perceived success; air of familiarity; claim to authority; noble pursuits; and framed authenticity. Using the Health and Retirement Study data from 2008, 2010, and 2012, the authors found that respondents who were male, were better educated, were single, and were younger disproportionately reported being defrauded in the past five years. This study also lays the groundwork for linking the five fraud languages to various factors such as financial literacy and dependency arising from questions within the HRS data set. Implications for such findings include protecting individuals near retirement from fraud and spreading public awareness about the importance of due diligence in the investment decision process.

Personality Characteristics and Financial Satisfaction among the Financially Strained
Derek Tharp

Martin Sea
Kansas State University

Abstract
This study investigates ways in which personality characteristics may influence financial satisfaction among financially strained individuals. Data from the 2012 wave of the HRS is used to examine relationships between personality characteristics (Big Five personality traits and positive/negative affect) and financial satisfaction among individuals in households exhibiting both objective and subjective indicators of financial strain. Results from a series of ordinal logistic regressions indicate that individual-level associations between personality characteristics and financial satisfaction remained largely the same regardless of financial strain. Consistent with the Broaden-and-Build Theory of Positive Emotions, evidence suggests that interventions aimed at influencing positive affect may be an effective means of enhancing well-being among financially strained populations. 

Choosing between post-tax and tax-deferred investments-Evidence from an Incentivized Survey
M. Marton Boyer
HEC- Montreal

Philippe d’Astous
HEC-Montreal

Pierre-Carl Michaud
HEC- Montreal

Abstract
This paper tests whether individuals make optimal saving choices between investments in tax-deferred accounts, such as Canada’s RRSP and USA’s traditional IRA and 401(k), and post-tax saving accounts, such as Canada’s TFSA and USA’s Roth IRA. We use the Canadian context of the Registered Retirement and Savings Plan (RRSP) and the Tax- Free Saving Account (TFSA). We elicit the risk and time preferences of 3,005 respondents aged between 35 and 55 years old using an incentivized survey administered online. We test the efficacy of two types of financial education treatments: a video explaining the fiscal differences between tax-deferred and post-tax saving accounts, and a presentation slide explicitly targeting the effect of means-testing of government transfers on effective marginal tax rates. Individuals were randomly selected to be part of one of three groups: the rest received no financial education, the second viewed the baseline video and the third viewed the video and the additional presentation slide. We start by asking ve questions of general knowledge relating to RRSPs and TFSAs after the treatment has been administered. The questions and the distribution of answers within our sample are presented in Table 1. We then show that, relative to a baseline group receiving no treatment, our financial education treatments improve general understanding of the tax implications of tax-deferred and post-tax saving accounts. Table 2 shows that the treatments increase the average score on the five different general knowledge questions by 6.8 to 8.4 percentage points on a baseline of 43%. We then test how our financial education treatments help individuals make optimal retirement savings choices.

We present individuals with various scenarios describing a windfall gain that must be invested either in a tax-deferred or a post-tax account. We compare the choice made by the individuals to two different optimal solutions: one where only the marginal tax rates of the individual during employment and retirement are used to make the decision, and one in which the optimal solution is derived from a theoretical model with CRRA preferences. Table 3 shows that the treatment increases the optimality of the choice made by treated individuals by 2.6 to 6.7 percentage points relative to a benchmark of 55%. Overall, our results suggest that financial education about tax-sheltered savings account can improve the optimal investment choices made by individuals.

Finding the major donor: the relationship between financial planning horizon and charitable giving
Zhikun Liu

Russell James
Texas Tech University

Abstract
Previous research has studied the characteristics associated with the presence and amount of charitable giving. However, few of these studies have explored the relationship between financial planning horizon and philanthropic donations, especially large donations. Using cross-sectional and longitudinal analysis of the Health and Retirement Study data, this paper explores the factors associated with charitable giving over time with a particular focus on financial planning horizon. This paper concludes that American adults who have longer financial planning horizons are more likely to make charitable donations compared to those whose planning horizon is short, i.e., less than six months. Among donors, major gifts are associated with long-term financial planning horizon, wealth, religious activity frequency, volunteer experience, and education.

Growing apart in marriage, or coming together? The structure and dynamics of differences in risk aversion between partners
Auke Platinga
University of Groningen
The Netherlands

Werner F.M. DeBondt
Driehaus College of Business
DePaul University

Abstract
Households are often faced with financial choices that have a large and lasting impact on the well-being of individual family members. Typical examples include the amount of borrowing for purchasing a home, a car or other durable goods, whether or not to take out various types of insurance, and so on. One significant decision is whether or not to invest in the stock market and additionally, for those willing to invest, the fraction of wealth to be invested stocks. Finance theory suggests that risk aversion is an important determinant in each of these cases. In most societies, the majority of households consist of couples in cohabitation or marriage, with or without children. In these households, decision making is likely to be more complex than suggested by a unitary actor model, particularly when preference and opinions differ. While one partner may be highly risk averse, the other may not be. This creates a dilemma. To see its magnitude, it is worthwhile to study the structure and dynamics of differences in risk aversion between partners. We use panel data from the Netherlands, in particular, the Dutch Household Survey (DHS) which is maintained by the Center for Economic Research (CentER) at Tilburg University.

The annual data start in 1993 and extend through 2016. We measure risk aversion and discrepancies in risk aversion within couples by drawing on assorted methods, subsamples and subperiods. The samples are large compared to previous literature. Much of our analysis is based on couples who are married for longer than a decade, and that we observe for (minimally) seven years. For instance, we compare differences in risk aversion between truly married partners vs. what hypothetically would be observed with male and female individuals who are randomly matched (but individually similar in age, income etc., to the ones that make up married couples). The actual gaps in risk aversion between truly married or co-habiting partners are substantially smaller. The resemblance in risk aversion may be due to (i) partner selection; (ii) to a convergence of values or beliefs over time, or (iii) to both factors. After all, couples that stay together for some years share similar life experiences. We examine various measures of convergence over time. Our findings suggest, however, that the similarity between partners is largely driven by partner selection. At the same time, there is evidence for a small, marginally significant convergence effect. Our study is relevant for financial advisers. Evidently, differences in risk perceptions and preferences between married partners may create decision impasse, but it is often far from evident what advisers can or should do about persistent disagreements of this kind.

Effects of Financial Literacy Overconfidence on the Mortgage Delinquency of US Households
Kyoung Tae Kim
University of Alabama

Abstract
This study investigated the effect of objective and subjective financial literacy on mortgage payment delinquency using the 2015 National Financial Capability Study dataset. A hierarchical model showed a substantial negative effect of objective literacy on delinquency, but subjective literacy did not have a significant effect. The predicted likelihood of delinquency at the 10th percentile of objective literacy was over three times as high as the likelihood at the 90th percentile. In a model with combinations of high or low objective and subjective financial literacy, those who were overconfident had a delinquency likelihood three times as high as those who had high objective and subjective literacy. Subjective literacy had substantial effects on delinquency both for high and for low objective literacy levels. In financial education, attention should be focused not only on objective learning, but also making sure consumers are aware of the limitations of their understanding.