
Andreas HackethalGoethe University Frankfurt · House of Finance
Andreas Hackethal
Professor of FInance
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106
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Introduction
Skills and Expertise
Publications
Publications (106)
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Incentivized experiments in which individuals receive monetary rewards according to the outcomes of their decisions are regarded as the gold standard for preference elicitation in experimental economics. These task-related real payments are considered necessary to reveal subjects' "true preferences." Using a systematic, large-sample ap...
This paper studies why investors buy dividend-paying assets and how they time consumption accordingly. We combine administrative bank data linking customers’ consumption and income to portfolio data and survey responses on financial behavior. We find that private consumption is excessively sensitive to dividend income. Investors across wealth, inco...
Cryptocurrencies have received growing attention from individuals, the media, and regulators. However, little is known about the investors whom these financial instruments attract. Using administrative data, we describe the investment behavior of individuals who invest in cryptocurrencies with structured retail products. We find that cryptocurrency...
Self-control is a personality trait that explains undersaving and nonparticipation decisions. We show that self-control failure also affects trading behavior among individuals on capital markets. We use smoking as the most socially accepted example of self-control failure among 13,644 German brokerage clients and compare the trading behavior of 3,5...
We study the conflict of interest that arises when a universal bank conducts proprietary trading alongside its retail banking services. Our data set contains the stock holdings of every German bank and those of their corresponding retail clients. We investigate (i) whether banks sell stocks from their proprietary portfolios to their retail customer...
Based on recent empirical evidence which suggests that as investors gain experience, their investment performance improves, we hypothesize that the specific mechanism through which experience translates into better investment returns is closely related to learning from investment mistakes. To test our hypotheses, we use an administrative dataset wh...
Using data from a large German brokerage, we find that individuals investing in passive exchange-traded funds (ETFs) do not improve their portfolio performance, even before transaction costs. Further analysis suggests that this is because of poor ETF timing as well as poor ETF selection (relative to the choice of low-cost, well-diversified ETFs). A...
We explore the impact of weather on trading by individual investors. Over a time span of 94 months, we analyze daily trading
records of individual investors. Controlling for various investor- and market-specific factors, we find a two-fold effect
of weather. We first observe that investor sentiment, as measured by purchases relative to sales, is si...
Using a European discount broker data set we simultaneously analyze the performance impact of ten measures of investment behavior proposed in the literature. Only under-diversification and lottery-stock preference are significantly related to returns and also economically large. Eliminating these investment behaviors would improve the average inves...
We use a comprehensive dataset from a German discount brokerage firm to investigate both the prevalence and effects of moving average trading heuristics among individual investors. We document an abnormal increase of 30% in individuals’ trading volume on signal days. More than one in 10 investors repeatedly places trades according to these heuristi...
This paper focuses on portfolio risk forecasting in an asymmetric framework. Risk is defined by two factors: the dependence structure and the volatility. In order to account for asymmetric dependencies, the return series’ interdependence is estimated via a copula approach rather than the correlation matrix. This allows us to capture tightening depe...
Do popular investment products such as passive ETFs and index funds benefit individual investors? Using data from one of the largest brokerages in Germany, we find that retail investors worsen their portfolio performance after using these products compared with non-users. As these securities make market timing easier, we investigate whether this de...
Using a unique dataset of individual investors, we categorize their security sale transactions into three types, depending on how the proceeds are used within a short period: liquidity sales (proceeds withdrawn from the sample bank), speculative sales (proceeds used to purchase other securities), and all other sales. Liquidity sales and speculative...
Why do retail investors trade? To analyze the impact of professional advice on trading, we combine administrative and survey data from a large German bank. Investors who report that they always rely on their advisor’s recommendations have a 25-percent-higher trading volume. Also, for investors who rely on advice the fraction of products for which t...
Based on recent empirical evidence which suggests that as investors gain experience, their investment performance improves, we hypothesize that the specific mechanism through which experience translates to better investment returns is closely related to learning from investment mistakes. To test our hypotheses, we use an administrative dataset whic...
Few studies have focused on the measurement of individual investors’ investment performance and more extensive research has been conducted on biases and investment mistakes – such as the disposition effect, security selection bias and lacking ability of market timing. No study so far has focused on measuring whether the realized performance was dri...
We use two data sets, from a large brokerage and a major bank, and regional data, to ask: (i) whether financial advisors tend to be matched with poorer, uninformed investors or with richer, experienced but presumably busy investors; (ii) how advised accounts actually perform relative to self-managed accounts; (iii) whether the contribution of indep...
Working with one of the largest brokerages in Germany, we record what happens when unbiased investment advice is offered to
a random set of approximately 8,000 active retail customers out of the brokerage's several hundred thousand retail customers.
We find that investors who most need the financial advice are least likely to obtain it. The investo...
The ‘Quiet Life Hypothesis (QLH)’ posits that banks with market power have less incentives to maximize revenues and minimize cost. Especially government owned banks with a public mandate precluding profit maximization might succumb to a quiet life. We use a unified approach that simultaneously measures market power and efficiency to test the quiet...
We study the conflict of interests that might arise at universal banks between their proprietary trading and their retail banking. Using a unique data set that covers the stock investments of each German bank and of its respective retail customers on a security-by-security basis we study the return characteristics of those stocks that flow from a b...
Why do people trade? Because they are told to! Using a unique dataset from a large German bank, we find that retail investors who report that they rely heavily on their advisors recommendations have a substantially higher trading volume and purchase a higher fraction of investment products for which their advisors were incentivized (promotion pro...
This paper measures liquidity creation of German savings banks over the period of 1997-2006 and tries to detect possible influence factors thereof. Using two recently developed techniques to measure liquidity creation, the so called “BB-Measure” as developed by Berger and Bouwman in 2009 and the “Liquidity Transformation” (LT) Gap as developed by D...
We use panel data from nine countries over the period 1996-2008 to test how revenue diversification affects bank value. Relying on a comprehensive framework for bank performance measurement, we find robust evidence against a conglomerate discount, unlike studies concerned with industrial firms. Rather, diversification increases bank profitability a...
Based on prior theoretical studies which indicate that unsophisticated investors take investment recommendations at face value, we hypothesize that financial advisors will take advantage of naïve investors. To test our hypotheses, we use a sample of 660 individual investors that switched from self-directed trading to a financial advice, thereby all...
We merge administrative information from a large German discount brokerage firm with regional data to examine if financial advisors improve portfolio performance. Our data track accounts of 32,751 randomly selected individual customers over 66 months and allow direct comparison of performance across self-managed accounts and accounts run by, or in...
We study the choice of bank nationality by foreign-born retail banking customers in the context of bank globalization. We argue theoretically that banks enter foreign markets to follow their non-corporate customers and thereby are able to exploit competitive advantages over domestic banks. Using detailed survey data on more than 1000 Turkish immigr...
It is known from the literature on the psychology of modes of behavior in stock markets that – besides other parameters – moods and emotions as personal influencing factors affect yield expectations and the risk-awareness of market participants. The constructs that may influence moods include the weather as well. Studies of the US market show that...
This paper examines as to how macroeconomic factors, and particularly the central bank's monetary policy, influence the liquidity creation of banks. We measure the liquidity created by Germany's state-owned savings banks over the 1997 to 2006 period and examine its determinants in a GMM framework focusing on bank specific as well as macroeconomic f...
Unanimously theory and empirical research acknowledge that taxation is an important determinant of household portfolio choice. The introduction of a withholding tax in Germany in 2007 yields the opportunity to shed light on three important issues in a natural experiment setting. Using transaction data from a German bank this paper proves that in li...
This paper contributes to the growing body of literature on mutual fund purchasing decisions, smart investment decision making and household finance. By using administrative data allowing for an empirical analysis on investor-specific level we derive three key findings. First, it is shown that lacking investor sophistication is the dominant driver...
This paper discusses the effect of background risks, namely labor income and housing, using a Mean-Co-Lower-Partial-Moment (CLPM) approach that allows the consideration of background risk, in the light of the heavily debated stock market participation puzzle. The major advantage of the Mean-CLPM approach is the possibility to consider all informati...
Investment advisors have significant influence on private investors' financial decisions but empirical studies of their behavior are rare. Based on a large and unique data set of the detailed portfolio compositions and daily transactions of more than 65,000 customers of a large German direct bank, we first compare advised investors with groups of n...
We empirically investigate the interplay and impact of process standardization and IT intensity on business process performance in terms of efficiency, quality, control, and processing time. To this aim we surveyed the retail advisory operations of Germany's largest banks. We find that standardization enhances efficiency, quality and control of the...
This paper investigates the impact of IT standardization on bank performance based on a panel of 457 German savings banks over the period from 1996 to 2006. We measure IT standardization as the fraction of IT expenses for centralized services over banks' total IT expenses. Bank efficiency, in turn, is measured by traditional accounting performance...
This paper contributes to the growing body of literature on private investors' investment mistakes in household finance. This paper takes off from the point that investors abstain from chasing alphas in selecting mutual funds, although Gruber (1996) has proven this to be a profitable strategy. He argues that reasons for this behaviour might be lack...
Empirical studies on household portfolios uniformly document a strong home bias in private investors' portfolios. This paper uses both parametric and historical simulation techniques to quantify the cost induced by home bias. Our results reveal major country-specific differences in the benefits derived from international diversification. While we f...
This paper is an early response to Campbell's (2006) call to analyze the role of financial intermediaries in household finance. We first sketch a basic theory of financial advice that proceeds from cognitive errors and costly information acquisition. We then derive hypotheses about honest and deceptive financial advice and test them on a unique adm...
Some individual investors make costly investment mistakes. Financial advisors might help them to avoid these mistakes. In this paper we compare the investment behavior of investors who are clients of independent financial advisors (IFA) with investors who do not obtain professional financial advice. We have data on the trading behaviour, portfolios...
Many private investors rely on the recommendations of professional financial advisors when making investment decisions. However, financial advice is a credence good and its quality is notoriously difficult to assess even ex-post. This paper aims to shed light on financial advisor characteristics that might serve as quality indicators. We surveyed 2...
This paper empirically investigates a novel approach for financial advisors to enhance customer satisfaction by segmenting customers based on their financial sophistication. We surveyed 761 customers of two German retail banks on their satisfaction with their latest purchase of an investment product. Customers had to state their perception of the a...
Current regulatory changes in the financial services industry aim at ensuring customer protection in the context of investment advisory services. This study demonstrates that customer orientation as proposed by MiFID could improve the service profit chain of financial service providers. We draw on a unique dataset from a large German retail bank in...
Many private investors trust in the investment recommendations of professional financial advisors. This study investigates the influence of financial advice on the suitability of asset allocation based on the risk preferences of individual investors. We draw on a unique dataset from a large German retail bank that combines customer and advisor attr...
Does BPO pay off at the firm-level? Although there are several studies which analyze the potential benefits of BPO, there is a virtual absence of research papers on BPO outcomes. Based on an analysis of 137 Business process outsourcing (BPO) ventures at 254 German banks in a period between 1994 and 2005, we found that the outsourcer's financial per...
Empirical studies report a gap between theoretical concepts of management accounting and the actual practice in organizations. Specifically, there is a virtual absence of literature on the individual factors that drive or hinder the adoption of sophisticated management accounting concepts. In this paper, we analyze drivers and inhibitors of managem...
We show that place of residence affects where investors trade stocks. We analyze transaction, account, and demographic data from some 19,000 retail customers of a German online brokerage house and find that investors prefer nearby stock exchanges. This local exchange bias can hardly be explained by informational advantage or lower transaction cost,...
We examine the drivers of vertical integration for an integrated and unified HR-process model for 42 large companies from the financial services (13 companies) and the non-financial services sector (29 companies). The basis of this paper is formed by the results of a survey analysing the structures, processes and sourcing activities of human resour...
Until the end of the last decade, German banking and corporate governance and the financial system as a whole were characterized by a remarkable degree of stability. The most important characteristics of the German financial system were bank dominance of the entire financial sector, a strong role of not strictly profit-oriented banks and a stakehol...
This paper shows that abnormal stock price returns around the date of open market repurchase announcements are four times higher in Germany than in the US (12% versus 3%). We hypothesize that this observation can be explained by national differences in repurchase regulations. Our empirical evidence indicates that German managers primarily buy back...
The German corporate governance system has long been cited as the standard example of an insider-controlled and stakeholder-oriented system. We argue that despite important reforms and substantial changes of individual elements of the German corporate governance system, the main characteristics of the traditional German system as a whole are still...
This paper examines vertical integration and its impact on profitability and shareholder value in the global banking industry. We derive a measure for vertical integration using a sample of 859 banks from 9 Anglo-Saxon and European countries covering the timeframe 1997–2002. Our results suggest that banks either operating on highly integrated or hi...
Over the last four years, more than 50,000 German bank employees lost their jobs and aggregate debt write-downs in the German banking market added up to 100 billion euros. Yet, these four problem-stricken years witnessed one of the biggest success stories in German banking, namely the rise of ING-DiBa to become Germany's fourth largest retail bank...
Structural change in the German banking system ?
This paper tries to answer the questions : has there been structural change in the German banking system so far, and will there be structural change in the near future ? These questions can only be answered by taking into account the uniqueness of the German banking system and its dependence on the...
The study shows that multi-bank loan pool contracts improve the risk-return profile of banks' loan business. Banks write simple contracts on the proceeds from pooled loan portfolios, taking into account the free-rider problems in joint loan production. Thereby especially smaller banks benefit greatly from diversifying credit risk while limiting the...
A widely recognized paper by Colin Mayer (1988) has led to a profound revision of academic thinking about financing patterns of corporations in different countries. Using flow-of-funds data instead of balance sheet data, Mayer and others who followed his lead found that internal financing is the dominant mode of financing in all countries, that the...
Die herrschende konjunkturelle Schwäche fördert auch in Deutschland eine strukturelle Krise des Bankensektors zu Tage. Diese strukturellen Probleme kamen nicht früher ans Licht, da sie über einen Zeitraum von mehr als zehn Jahren von Sondereffekten verdeckt wurden. So brachte z. B. die Wiedervereinigung eine massive Ausweitung des Kreditvolumens, B...
This paper is a draft for the chapter "German banks and banking structure" of the forthcoming book "The German financial system" edited by J.P. Krahnen and R.H. Schmidt (Oxford University Press). As such, the paper starts out with a description of past and present structural features of the German banking industry. Given the presented empirical evi...
We show that multi-bank loan pools improve the risk-return profile of regional banks' loan business. Banks write simple contracts on the proceeds from pooled loan portfolios, taking into account the agency problems in joint loan production. Thereby, banks benefit from diversifying credit risk while limiting the efficiency loss due to adverse incent...
Das Finanzsystem eines Landes ist mehr als dessen Finanzsektor; es umfasst auch die Art und Weise, wie Haushalte Vermögen bilden und halten und wie sich Unternehmen finanzieren, sowie das Corporate-Governance-System eines Landes.
In diesem Beitrag wird untersucht, ob und wie sich die Finanzsysteme Deutschlands, Großbritanniens und Frankreichs in de...
Initiated by the seminal work of Diamond/Dybvig (1983) and Diamond (1984), advances in the theory of financial intermediation have sharpened our understanding of the theoretical foundations of banks as special financial institutions. What makes them “unique” is the combination of accepting deposits and issuing loans. However, in recent years the no...