Smokers self-directing their investment trade more frequently, exhibit more biases & achieve lower portfolio returns; those aware of their limited levels of self-control delegate decision making to professional advisors & fund managers

Smoking hot portfolios? self-control and investor decisions. Charline Uhr, Steffen Meyer, Andreas Hackethal. Goethe Universitat's SAFE working paper series; No. 245, March 2019. https://ssrn.com/abstract=3347625

Self-control failure is among the major pathologies (Baumeister et al. (1994)) affecting individual investment decisions which has hardly been measurable in empirical research. We use cigarette addiction identified from checking account transactions to proxy for low self-control and compare over 5,000 smokers to 14,000 nonsmokers. Smokers self-directing their investment trade more frequently, exhibit more biases and achieve lower portfolio returns. We also find that smokers, some of which might be aware of their limited levels of self-control, exhibit a higher propensity than nonsmokers to delegate decision making to professional advisors and fund managers. We document that such precommitments work successfully.


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