Behavioral Finance

/Behavioral Finance
­

Chart: Could You Come Up with $400 In Case of An Emergency?

From WSJ:

FI-AA004A_LOWIN_16U_20170421113910

In 2015, we posted research indicating that 47% of Americans couldn’t come up with $400 in case of an emergency. These charts and data tables provide some additional context around that statistic. Questions for your students:

NGPF Podcast: Tim Talks To Prof. Meir Statman About Behavioral Finance

download

I enjoyed my recent conversation with Finance professor Meir Statman of Santa Clara University, which is just down the street from the NGPF offices. Meir conducted some of the earliest research in what we now know as behavioral finance. He discusses his book, Finance for Normal People, and shares his insights about how investing should be taught in school (spoiler alert: Keep It Simple!). He also describes his approach to playing the stock market game and why fees matter so much when comparing investment options. You will know more about investing after you listen to Prof. Statman. Enjoy!
Details:

What’s New In Financial Education Research?

Hat tip to Brian Page for reminding me about the recent Cherry Blossom Financial Education Institute held in early April. Here’s a summary of a few of the papers that were presented that you might be interested in:

Interactive: What Are Your Odds Of Winning the Lottery?

Great simulation from LA Times allows you to play multiple iterations of the PowerBall lottery to see how even small wins can’t hide the fact that ultimately you will LOSE!

Screen Shot 2017-04-17 at 6.48.55 PM

Here’s how it works: 

What Do High School Seniors Think About the Financial Aid Process?

It’s April so I thought I would do a temperature check for my AVID class just before we dove into an activity analyzing aid award packages. Here’s the word cloud that came from their individual responses (with some mentor comments sprinkled in which tended to be more on the positive side):

Screen Shot 2017-04-07 at 12.56.44 AM

Why did I do this?

What I’ve Been Reading This Week (For Week Ending 4/8)

  • Tesla now worth more than Ford but their valuation depends on hitting aggressive sales targets for Model 3 (Economist)

But Tesla is going to have to crank production up by an awful lot more to make the 500,000 cars a year which Mr Musk wants to see pouring off the production line by 2018, let alone the 1m intended for just two years later. To reach those volumes, Tesla is counting on its forthcoming Model 3. Priced at around $35,000, the new car will cost around half that of the other two models. Due to begin production later this year, the Model 3 is supposed to take Tesla into the mass market, where it will face stiff competition from plug-in vehicles produced by existing mass manufacturers, including GM, Nissan and BMW.

What Percentage of IPhone Users Have Tried Apple Pay?

Answer (from WSJ): 13%

Back in 2014 (eons ago in the tech industry), we marked the launch of Apple Pay with a post that included several news summaries and the potential that Apple saw in the product. We had students analyze the stories and then answer that personal question “Would you use Apple Pay?” Apparently the answer for most IPhone users two years later is a resounding “No.”

Jessica also wrote a post in early 2015 asking the question “Can Teenagers Use Apple Pay?” Find out the answer here.

The article enumerates the reasons why the rate of adoption has not been faster:

Question: Would You Rather Have $1 Million Or $5,000 Monthly In Retirement?

Interesting WSJ article that has a behavioral finance bent to it. Before I give you the answer, write down your own response to this question. Your choice will explain a lot about how you think about money. First, the reasons those two choices were given was no accident. According to the article, the $1 million lump sum and $5,000 monthly payment are roughly equivalent when it comes to annuity pricing.  So what does your choice tell you?

  • Choose $1 million and you suffer from an “illusion of wealth.” What is that?
By |April 5th, 2017|Behavioral Finance, Budgeting, Question of the Day, Research|