IDEAS home Printed from https://ideas.repec.org/a/kap/fmktpm/v30y2016i3d10.1007_s11408-016-0274-8.html
   My bibliography  Save this article

Is there Swissness in investment decision behavior and investment competence?

Author

Listed:
  • Kremena Bachmann

    (University of Zurich)

  • Thorsten Hens

    (University of Zurich
    Norwegian School of Economics and Business Administration)

Abstract

Based on a large international survey, we analyze how German-, French-, and Italian-speaking residents of Switzerland differ in their investment decision behavior and investment competence compared to their closest neighbors abroad who speak the same language. Although language may be closer to the individual self than country of residence, we find that there are greater similarities in the decision behavior of residents of Switzerland speaking different languages than there are between these and their linguistically closest neighbors abroad. These similarities hold also for the ability to avoid investment mistakes, which is stronger in all Swiss regions compared to the linguistically closest regions abroad. The Swissness in investment competence is more likely to be emotionally than knowledge driven and is associated with regional differences in the relationships with investment advisors.

Suggested Citation

  • Kremena Bachmann & Thorsten Hens, 2016. "Is there Swissness in investment decision behavior and investment competence?," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 30(3), pages 233-275, August.
    • Handle: RePEc:kap:fmktpm:v:30:y:2016:i:3:d:10.1007_s11408-016-0274-8
    DOI: 10.1007/s11408-016-0274-8
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s11408-016-0274-8
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s11408-016-0274-8?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Ernst Fehr & Karla Hoff, 2011. "Introduction: Tastes, Castes and Culture: the Influence of Society on Preferences," Economic Journal, Royal Economic Society, vol. 121(556), pages 396-412, November.
    2. Yu-Jane Liu & Chih-Ling Tsai & Ming-Chun Wang & Ning Zhu, 2010. "Prior Consequences and Subsequent Risk Taking: New Field Evidence from the Taiwan Futures Exchange," Management Science, INFORMS, vol. 56(4), pages 606-620, April.
    3. Karla Hoff & Mayuresh Kshetramade & Ernst Fehr, 2011. "Caste and Punishment: the Legacy of Caste Culture in Norm Enforcement," Economic Journal, Royal Economic Society, vol. 121(556), pages 449-475, November.
    4. Laurent E. Calvet & John Y. Campbell & Paolo Sodini, 2009. "Measuring the Financial Sophistication of Households," American Economic Review, American Economic Association, vol. 99(2), pages 393-398, May.
    5. Acker, Daniella & Duck, Nigel W., 2008. "Cross-cultural overconfidence and biased self-attribution," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 37(5), pages 1815-1824, October.
    6. Annamaria Lusardi & Olivia S. Mitchell, 2014. "The Economic Importance of Financial Literacy: Theory and Evidence," Journal of Economic Literature, American Economic Association, vol. 52(1), pages 5-44, March.
    7. Stulz, Rene M. & Williamson, Rohan, 2003. "Culture, openness, and finance," Journal of Financial Economics, Elsevier, vol. 70(3), pages 313-349, December.
    8. Jere R. Behrman & Olivia S. Mitchell & Cindy K. Soo & David Bravo, 2012. "How Financial Literacy Affects Household Wealth Accumulation," American Economic Review, American Economic Association, vol. 102(3), pages 300-304, May.
    9. Beatrix Brügger & Rafael Lalive & Josef Zweimüller, 2009. "Does Culture Affect Unemployment? Evidence from the Röstigraben," NRN working papers 2009-10, The Austrian Center for Labor Economics and the Analysis of the Welfare State, Johannes Kepler University Linz, Austria.
    10. William N. Goetzmann & Alok Kumar, 2008. "Equity Portfolio Diversification," Review of Finance, European Finance Association, vol. 12(3), pages 433-463.
    11. Summers, Barbara & Duxbury, Darren, 2012. "Decision-dependent emotions and behavioral anomalies," Organizational Behavior and Human Decision Processes, Elsevier, vol. 118(2), pages 226-238.
    12. Joseph Henrich, 2000. "Does Culture Matter in Economic Behavior? Ultimatum Game Bargaining among the Machiguenga of the Peruvian Amazon," American Economic Review, American Economic Association, vol. 90(4), pages 973-979, September.
    13. Brad M. Barber & Terrance Odean, 2000. "Trading Is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors," Journal of Finance, American Finance Association, vol. 55(2), pages 773-806, April.
    14. Blume, Marshall E & Friend, Irwin, 1975. "The Asset Structure of Individual Portfolios and Some Implications for Utility Functions," Journal of Finance, American Finance Association, vol. 30(2), pages 585-603, May.
    15. Joseph Henrich, 2000. "Does culture matter in economic behavior? Ultimatum game bargaining among the machiguenga," Artefactual Field Experiments 00067, The Field Experiments Website.
    16. Terrance Odean, 1998. "Are Investors Reluctant to Realize Their Losses?," Journal of Finance, American Finance Association, vol. 53(5), pages 1775-1798, October.
    17. Gary Charness & Dan Levin, 2005. "When Optimal Choices Feel Wrong: A Laboratory Study of Bayesian Updating, Complexity, and Affect," American Economic Review, American Economic Association, vol. 95(4), pages 1300-1309, September.
    18. Yates, J. Frank & Lee, Ju-Whei & Shinotsuka, Hiromi & Patalano, Andrea L. & Sieck, Winston R., 1998. "Cross-Cultural Variations in Probability Judgment Accuracy: Beyond General Knowledge Overconfidence?," Organizational Behavior and Human Decision Processes, Elsevier, vol. 74(2), pages 89-117, May.
    19. Beatrix Eugster & Raphaël Parchet, 2011. "Culture and Taxes: Towards Identifying Tax Competition," Cahiers de Recherches Economiques du Département d'économie 11.05, Université de Lausanne, Faculté des HEC, Département d’économie.
    20. Barberis, Nicholas & Xiong, Wei, 2012. "Realization utility," Journal of Financial Economics, Elsevier, vol. 104(2), pages 251-271.
    21. Vulkan, Nir, 2000. "An Economist's Perspective on Probability Matching," Journal of Economic Surveys, Wiley Blackwell, vol. 14(1), pages 101-118, February.
    22. Ernst Fehr & Karla Hoff, 2011. "Tastes, castes, and culture: The influence of society on preferences," ECON - Working Papers 026, Department of Economics - University of Zurich.
    23. Samuel Bowles, 1998. "Endogenous Preferences: The Cultural Consequences of Markets and Other Economic Institutions," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 75-111, March.
    24. Feld, Lars P. & Kirchgassner, Gebhard, 2000. "Direct democracy, political culture, and the outcome of economic policy: a report on the Swiss experience," European Journal of Political Economy, Elsevier, vol. 16(2), pages 287-306, June.
    25. Kelly, Morgan, 1995. "All their eggs in one basket: Portfolio diversification of US households," Journal of Economic Behavior & Organization, Elsevier, vol. 27(1), pages 87-96, June.
    26. Beatrix Eugster & Rafael Lalive & Andreas Steinhauer & Josef Zweimüller, 2011. "The Demand for Social Insurance: Does Culture Matter?," Economic Journal, Royal Economic Society, vol. 121(556), pages 413-448, November.
    27. Shefrin, Hersh & Statman, Meir, 1985. "The Disposition to Sell Winners Too Early and Ride Losers Too Long: Theory and Evidence," Journal of Finance, American Finance Association, vol. 40(3), pages 777-790, July.
    28. Yates, J. Frank & Zhu, Ying & Ronis, David L. & Wang, Deng-Feng & Shinotsuka, Hiromi & Toda, Masanao, 1989. "Probability judgment accuracy: China, Japan, and the United States," Organizational Behavior and Human Decision Processes, Elsevier, vol. 43(2), pages 145-171, April.
    29. M. Keith Chen, 2013. "The Effect of Language on Economic Behavior: Evidence from Savings Rates, Health Behaviors, and Retirement Assets," American Economic Review, American Economic Association, vol. 103(2), pages 690-731, April.
    30. Brad M. Barber & Yi-Tsung Lee & Yu-Jane Liu & Terrance Odean, 2009. "Just How Much Do Individual Investors Lose by Trading?," Review of Financial Studies, Society for Financial Studies, vol. 22(2), pages 609-632, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Rieger, Marc O. & Wang, Mei & Phan, Thuy Chung & Gong, Yujing, 2022. "Trend following or reversal: Does culture affect predictions and trading behavior?," Global Finance Journal, Elsevier, vol. 54(C).
    2. Brown, Martin & Henchoz, Caroline & Spycher, Thomas, 2018. "Culture and financial literacy: Evidence from a within-country language border," Journal of Economic Behavior & Organization, Elsevier, vol. 150(C), pages 62-85.
    3. Adriel Jost, 2018. "Cultural Differences in Monetary Policy Preferences," Working Papers 2018-02, Swiss National Bank.
    4. Brown, Martin & Henchoz, Caroline & Spycher, Thomas, 2017. "Culture and Financial Literacy," Working Papers on Finance 1703, University of St. Gallen, School of Finance.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Guiso, Luigi & Sodini, Paolo, 2013. "Household Finance: An Emerging Field," Handbook of the Economics of Finance, in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, volume 2, chapter 0, pages 1397-1532, Elsevier.
    2. Francisco Gomes & Michael Haliassos & Tarun Ramadorai, 2021. "Household Finance," Journal of Economic Literature, American Economic Association, vol. 59(3), pages 919-1000, September.
    3. Maximilian Koestner & Benjamin Loos & Steffen Meyer & Andreas Hackethal, 2017. "Do individual investors learn from their mistakes?," Journal of Business Economics, Springer, vol. 87(5), pages 669-703, July.
    4. Wang, Mei & Rieger, Marc Oliver & Hens, Thorsten, 2016. "How time preferences differ: Evidence from 53 countries," Journal of Economic Psychology, Elsevier, vol. 52(C), pages 115-135.
    5. Camille Magron & Maxime Merli, 2012. "Stocks repurchase and sophistication of individual investors," Working Papers of LaRGE Research Center 2012-02, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.
    6. Rieger, Marc O. & Wang, Mei & Phan, Thuy Chung & Gong, Yujing, 2022. "Trend following or reversal: Does culture affect predictions and trading behavior?," Global Finance Journal, Elsevier, vol. 54(C).
    7. Wolfgang Breuer & Bushra Ghufran & Astrid Juliane Salzmann, 2020. "Investors' time preferences and takeover performance," Post-Print hal-02508909, HAL.
    8. Duxbury, Darren & Hudson, Robert & Keasey, Kevin & Yang, Zhishu & Yao, Songyao, 2015. "Do the disposition and house money effects coexist? A reconciliation of two behavioral biases using individual investor-level data," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 34(C), pages 55-68.
    9. Campbell, John Y & Ranish, Benjamin, 2014. "Getting Better or Feeling Better? How Equity Investors Respond to Investment Experience," CEPR Discussion Papers 9907, C.E.P.R. Discussion Papers.
    10. Breuer, Wolfgang & Ghufran, Bushra & Salzmann, Astrid Juliane, 2020. "Investors' time preferences and takeover performance," International Review of Financial Analysis, Elsevier, vol. 67(C).
    11. Juhani T. Linnainmaa, 2011. "Why Do (Some) Households Trade So Much?," Review of Financial Studies, Society for Financial Studies, vol. 24(5), pages 1630-1666.
    12. Jakusch, Sven Thorsten & Meyer, Steffen & Hackethal, Andreas, 2019. "Taming models of prospect theory in the wild? Estimation of Vlcek and Hens (2011)," SAFE Working Paper Series 146, Leibniz Institute for Financial Research SAFE, revised 2019.
    13. Stephen G Dimmock & Roy Kouwenberg & Olivia S Mitchell & Kim Peijnenburg, 2021. "Household Portfolio Underdiversification and Probability Weighting: Evidence from the Field," Review of Financial Studies, Society for Financial Studies, vol. 34(9), pages 4524-4563.
    14. Uhr, Charline & Meyer, Steffen & Hackethal, Andreas, 2021. "Smoking hot portfolios? Trading behavior, investment biases, and self-control failure," Journal of Empirical Finance, Elsevier, vol. 63(C), pages 73-95.
    15. Patrick Roger, 2012. "Portfolio diversification dynamics of individual investors: a new measure of investor sentiment," Working Papers of LaRGE Research Center 2012-01, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.
    16. Margarida Abreu, 2017. "How Biased is the Behavior of the Individual Investor in Warrants?," Working Papers REM 2017/07, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
    17. Liu, Hongqi & Peng, Cameron & Xiong, Wei A. & Xiong, Wei, 2022. "Taming the bias zoo," Journal of Financial Economics, Elsevier, vol. 143(2), pages 716-741.
    18. Seth Neumuller & Casey Rothschild, 2017. "Financial Sophistication and Portfolio Choice over the Life Cycle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 26, pages 243-262, October.
    19. Li, Xiao, 2020. "When financial literacy meets textual analysis: A conceptual review," Journal of Behavioral and Experimental Finance, Elsevier, vol. 28(C).
    20. Şenol, Doğaç & Onay, Ceylan, 2023. "Impact of gamification on mitigating behavioral biases of investors," Journal of Behavioral and Experimental Finance, Elsevier, vol. 37(C).

    More about this item

    Keywords

    Behavioral finance; Investment mistakes; Cultural finance;
    All these keywords.

    JEL classification:

    • D19 - Microeconomics - - Household Behavior - - - Other
    • Z10 - Other Special Topics - - Cultural Economics - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:fmktpm:v:30:y:2016:i:3:d:10.1007_s11408-016-0274-8. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.