The Ulysses option: Smoking and delegation in individual investor decisions

Steffen Meyer and Charline Uhr

Finance Research Letters, 2022, vol. 46, issue PB

Abstract: Are smokers more likely to seek and follow financial advice? We build on literature which shows that investors who smoke have self-control issues and trade impulsively. We empirically measure self-control failures by identifying cigarette addiction in a sample of German brokerage clients and show that smokers are more likely to delegate their decisions to financial advisors which work like a commitment device. Potential endogeneity issues and self-selection are addressed by using propensity score matching. Despite advisor incentives, such commitments work successfully in lowering overtrading, improving investment biases and increasing performance of low self-control investors.

Keywords: Self-Control; Commitment; Portfolio Allocation; Individual Investor; Trading Behavior (search for similar items in EconPapers)
JEL-codes: D14 G11 G41 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:46:y:2022:i:pb:s1544612321003962

DOI: 10.1016/j.frl.2021.102478

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