Is there Swissness in investment decision behavior and investment competence?
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Is there Swissness in investment decision behavior and investment competence? Kremena Bachmann1 · Thorsten Hens1,2
Published online: 26 July 2016 © Swiss Society for Financial Market Research 2016
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. Keywords Behavioral finance · Investment mistakes · Cultural finance JEL Classification D19 · Z10
We thank the Baloise Group for financial support in collecting the data. Comments provided by Christian Dreyer, Marc-Oliver Rieger, Mei Wang, Manish Gupta, Michal Dzielinski, the participants of the 2015 annual meeting of the Swiss Society of Economics and Statistics, and two anonymous referees are greatly appreciated.
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Thorsten Hens [email protected] Kremena Bachmann [email protected]
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Department of Banking and Finance, University of Zurich, Plattenstrasse 32, 8032 Zurich, Switzerland
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Norwegian School of Economics and Business Administration, Helleveien 30, 5045 Bergen, Norway
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K. Bachmann, T. Hens
1 Introduction Traditionally, economists have assumed that economic behavior is independent of culture. However, as Fehr and Ho (2011) note, this view is questionable in light of a growing literature showing that economic behavior can be endogenous and can be shaped by societal and cultural influences (e.g., Bowles 1998; Henrich 2000; Eugster et al. 2011; Hoff et al. 2011). In this paper, we analyze whether investment decision behavior and investment competence in Switzerland differs from that in neighboring countries. By “investment competence”, we mean the ability to avoid the investment mistakes that usually occur when people make emotional decisions or use heuristics or “rules of thumb” to compensate for lack of knowledge or experience. Based on a large survey carried out in three linguistically different parts of Switzerland as well as in neighboring countries, we find that in their decision behavior, Swiss are more similar to each other than to their neighbors abroad who speak the same language. 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 comp
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