Study: Reckless drivers also prone to take risks on stock market
Investors who get many speeding tickets tend to have volatile stock portfolios as well
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By Olavi Koistinen
Thrill-seeking investors, whose stock portfolios fluctuate heavily, also tend to be fast drivers, according to a fresh study juxtaposing highway speeding tickets with trading habits on the stock exchange.
The study by Professor Matti Keloharju compares highway speed with the speed of dealing on the market.
"One speeding ticket during a period of four years increases the number of stock market deals by about ten per cent", he explains.
Keloharju, a professor of finance at the Helsinki School of Economics and Business Administration, is one of the authors of the study. The other researcher is Professor Mark Grinblatt of the University of California in Los Angeles.
The two professors researched the matter on the basis of traffic violation records of the former Uusimaa Province in 1997 - 2001.
The data was compared with records on stock market trades. Information was analysed concerning 95,000 people.
The individual recipients of traffic tickets were not specified - the information was handled as statistical data, and the investors were not interviewed.
The study suggests that many seek the same kinds of thrills from stock market trading as they do from gambling. "Investing involves other factors than trying to get the greatest possible yield", Keloharju says.
Investors are sometimes aware of their own motivation. "Many who go to Las Vegas know that the casinos there will win in the long run. This does not prevent people from going there."
The study was unusually painstaking, Keloharju says. It was started in 2001, and the decision to publish the article in the prestigious Journal of Finance came a week ago.
This is the first study examining the correlation between speeding tickets and trading habits.
The Nordic Central Securities Depository had an unusually rich amount of data available, by international standards. It formed the foundation of the work.
"We have brought out our results at quite a number of universities, and our listeners have always been very interested."
The study on fines is part of research examining how a tendency for thrill-seeking and an inflated sense of self-confidence affect stock market investors.
An inflated sense of self-confidence can mean, for instance, that most drivers consider themselves more skillful than the average motorist. The same can be seen on the stock market. "People invest because they think that they are better at it than others are."
The data also shows that owners of sports cars are more intense traders on the stock market.
"We were very picky about what kind of a vehicle we defined as a sports car. I calculated the engine power and weight of the car for each model."
The marital status of the investor also affected the amount of trading they made on the market - at least for men. "It has previously been established that if a man marries, the move significantly reduces his desire to trade."
What about living together without being married? Does that also reduce the amount of trading a man does? According to the study, it does not.
"Perhaps this is some kind of a lesson on the difference between open partnerships and marriage."
Helsingin Sanomat / First published in print 2.2.2008
OLAVI KOISTINEN / Helsingin Sanomat
olavi.koistinen@hs.fi
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| 5.2.2008 - THIS WEEK |
 Study: Reckless drivers also prone to take risks on stock market |
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