Psychological biases of individual investors and financial satisfaction

Traditional finance theory is based on the principle of maximization of utility and explains how choices are made by rational people. Although the theory provides numerous insights, observation of actual behavior of people was seen to be different from what the theory predicted. The homo economicus is in reality a homo sapien who has emotions and beliefs that help to filter the content from his or her environment. These beliefs and preferences that arise due to cognitive limitations, presence of emotions, and various psychological motives guide or bias his or her decisions. Much literature states that the biases should be corrected as they negatively impact financial behaviour and individual's well‐being. However, evolutionary psychology considers biases as design features of human mind. Thus, biases are not always bad, as at times, these biases can help the individual investor to choose the best course of action from the multiple possibilities and enable committing the less costly mistakes, thereby helping the individual to achieve satisficing behaviour. This paper aims to explore the investor biases and see whether they are related to the financial satisfaction of the individuals. Financial satisfaction is the measure of satisfaction with one's financial situation. The results showed that overconfidence bias, reliance on expert bias, and self‐control bias have a positive and significant association with financial satisfaction levels. Association of a few other biases with financial satisfaction was also observed under certain control conditions. This study provides further insights on investor behavior and paves the way for various possibilities for future research.     

In all questions, my interest is not in the individual people but in the analytic movement as a whole. It will be hard enough here in Europe in the times to come to keep it going. After all, we are just a handful of people who really have that in mind

The paper tries to deal with the difficult and at times contradictory decisions that the then leaders of the IPA, S. Freud, A. Freud, E. Jones etc. had to adopt as whether or not to clearly inform the readers of Die Internationale Zeitschrift für Psychoanalyse and the International Journal of Psychoanalysis, the official scientific periodicals of the IPA, of the tragic events concerning first the German Psychoanalytic Society and then the Vienna Psychoanalytic Society and the newborn Italian Psychoanalytic Society and other European psychoanalytic societies during the years 1933-1945. Because of the anti-Jewish persecution by the Nazi and fascist regimes the IPA had to face the extremely difficult task of helping its Continental Jewish members to emigrate to the USA, Great Britain and other countries in order to save their lives and to allow psychoanalysis to survive, with enormous radical consequences for the scientific and sociocultural future developments of the discipline.The following notes are dedicated to those non-Aryans and Aryans who could not find a proper rescue and whose graves became the wind which scattered the ashes of their bodies with the smoke coming out of the chimneys of the Nazi gas chambers.     

Impact of Economic Hardship and Financial Threat on Suicide Ideation and Confusion

The present study tested the extent to which perceived economic hardship is associated with psychological distress (suicide ideation and confusion) after controlling for personal characteristics. It also explored whether perceived financial threat (i.e., fearful anxious-uncertainty about the stability and security of one's personal financial situation) mediates the relationship between economic hardship and psychological distress outcomes. The theoretical model was tested in a sample of Canadian students (n = 211) and was validated in a community sample of employed Portuguese adults (n = 161). In both samples, the fit of the model was good. Parameter estimates indicated that greater experience of economic hardship increased with financial threat, which in turn increased with levels of suicide ideation and confusion. We discuss the practical implications of these results, such as for programs aimed at alleviating the burden of financial hardship, in our concluding remarks.     

Social influence on predictions of simulated stock prices

Herding in financial markets refers to that investors are influenced by others. This study addresses the importance of consistency for herding. It is suggested that, in financial markets perceptions of consistency are based on repeated observations over time. Consistency may then be perceived as the agreement across time between investors' predictions. In addition, consistency may be related to variance over time in each investor's predictions. In an experiment using a Multiple Cue Probability Learning paradigm, 96 undergraduates made multi‐trial predictions of future stock prices given information about the current price and the predictions made by five fictitious others. Consistency was varied between the others' predictions (correlation) and within the others' predictions (variance). The results showed that the predictions were significantly influenced by the others' predictions when these were correlated. No effect of variance was observed. Hence, participants were influenced by the others when they were in agreement, regardless of whether they varied their predictions over trials or not. Copyright © 2008 John Wiley & Sons, Ltd.     

Financial strain,social capital,and perceived health during economic recession: a longitudinal survey in rural Canada

Although the health consequences of financial strain are well documented, less is understood about the health-protective role of social capital. Social capital refers to a sense of community embeddedness, which is in part reflected by group membership, civic participation, and perceptions of trust, cohesion, and engagement. We investigated whether perceptions of social capital moderate the relation between financial strain and health, both mental and physical. This longitudinal study surveyed adults in two communities in rural Ontario where significant job losses recently occurred. Data were collected on financial strain, social capital, perceived stress, symptoms of anxiety and depression, and physical health on three occasions over 18 months (N's = 355, 317, and 300). As expected, financial strain positively related to perceived stress, poor physical health and symptoms of anxiety and depression, whereas social capital related to less stress, better physical health, and fewer symptoms of anxiety and depression. Effects of financial strain on perceived stress and depressive symptoms were moderated by social capital such that financial strain related more closely to perceived stress and depressive symptoms when social capital was lower. The findings underscore the health-protective role of community associations among adults during difficult economic times.     

Private Investigations of White‐Collar Crime Suspicions: A Qualitative Study of the Blame Game Hypothesis

The activity of private investigations by fraud examiners is a business of lawyers, auditors, and other professionals who investigate suspicions of financial crime by white‐collar criminals. This paper presents results from an empirical study of investigation reports. The available sample consists of 28 reports written mostly by auditing firms such as Deloitte, Ernst & Young, and PwC. The blame game can occur at two stages in a private investigation. First, the mandate formulated by a client may point investigators in a specific direction. Next, investigators sometimes suffer from a tunnel view of predetermined opinions. In the sample of 28 investigations reports, more than half of them involve potential blame game victims. Copyright © 2014 John Wiley & Sons, Ltd.     

Do couples who play together stay together? A longitudinal dyadic examination of shared leisure,financial distress,and relationship outcomes

We examined whether shared leisure offers protection against negative associations between financial distress and relationship quality (satisfaction and commitment) for lower- and higher-income couples. We expected husbands' and wives' reports of shared leisure would be protective of the effects of financial distress (Time 2) on relationship satisfaction (Time 3) and commitment (Time 4) for higher-income couples (but not lower-income couples). Participants were drawn from a nationally representative, longitudinal study of US newly married couples. The analytic sample included both members of 1382 different-gender couples with data across the three sampled waves of data collection. Shared leisure was largely protective of the effects of financial distress on husbands' commitment for higher-income couples. For lower-income couples, higher shared leisure exacerbated this effect. These effects were only found at extreme levels of household income and shared leisure. When considering if couples who play together stay together, our findings suggest that it can, but it is critical to understand the financial situation of the couple and the resources they may have to support shared leisure activities. Professionals working with couples should consider their financial situation when making recommendation to engage in shared leisure, such as going out for recreation.     

The Relative Importance of Personality,Financial Satisfaction,and Autonomy for Different Subjective Well-Being Facets

Abstract

Using a nationally representative sample (N?=?507) from Singapore, this study examined whether personality, financial satisfaction, and autonomy were important to subjective well-being (SWB), and how the importance of these predictors varied across different SWB facets—life satisfaction, happiness, positive feelings, and negative feelings. The findings indicated that neuroticism, financial satisfaction, and autonomy, were important predictors of happiness. Personality was most important for affective well-being (i.e., positive and negative feelings), whereas financial satisfaction was most important for life satisfaction. Specifically, neuroticism accounted for substantial variance in positive and negative feelings, and was the strongest correlate among the Big Five traits. In contrast, financial satisfaction explained most of the variance in life satisfaction. This highlights that the importance of well-being predictors depended on the facet of well-being examined. The findings suggest that residents in an affluent nation like Singapore do not emphasize only postmaterialist values (e.g., autonomy) and disregard materialist concerns (e.g., financial satisfaction). Though certain SWB facets (positive and negative affect) are largely influenced by dispositional factors, other facets (life satisfaction and happiness) are closely related to factors (e.g., financial satisfaction, autonomy) that may be affected by social policies. Policymakers can thus target those aspects to enhance people’s SWB.