March 13, 2020

DIW Applied Micro Seminar

Household Finance 0.5 or 2.0? Eliciting Individuals’ Financial Decision-Making Approaches (canceled)

Date

March 13, 2020
13:15 - 14:30
- Canceled -

Location

Anna J. Schwartz Room
Room 5.2.010
Mohrenstraße 58
10117 Berlin

Speaker

Thomas Post, Maastricht University

Inviter

Carsten Schröder/Johannes König

Abstract:   How exactly do individuals approach financial decisions? Do they apply sophisticated formulas, back of the envelope math, do they guess or something else? We show that literally asking individuals to explain their approaches generates new insights about those questions that are reliable and have predictive power out of sample. We find, for example, that when assessing the value of an annuity 40% of individuals use some math with some using formulas similar to actuaries; the other 60% apply guessing strategies. Valuation approaches predict valuation results, valuation precision, and behavioral reaction to a priming intervention designed to match one approach discovered. Our method opens new pathways to understanding financial decision making as well as designing effective policy interventions.

Speaker

Thomas Post, Maastricht University