Master Thesis Topics HWS 2017 Chair of Finance and Banking PD Dr. Maximilian Wimmer
Topic W1 Topic W1: What s driving retirement intentions? Topic description Ø Malmendier and Nagel (2011) show that individual experiences of macroeconomic shocks affect financial risk taking. They find that individuals who have experienced low stock market returns throughout their lives so far report lower willingness to take financial risk, are less likely to participate in the stock market, invest a lower fraction of their liquid assets in stocks if they participate, and are more pessimistic about future stock returns Ø The share of private sector employees who participated in defined benefit plans declined from 38% in 1980 to 20% in 2008, while the share participating in defined contribution plans rose from 8% to 31% over the same time span (Butrica et al. 2009). Ø This leads to an increase in equity exposure among households and shifts the risk of poor investment experience from employers to employees. Ø Therefore declining stock markets could also cause changes in retirement intentions, due to declines in financial assets Ø Using panel data from the Health and Retirement Study (1992 to 2014) should investigate the relationship between stock market performance and retirement intentions (Similar to Goda, Shloven, and Slavov (2012)) 2
Topic W1 Topic W1: What s driving retirement intentions? Topic description Ø Natural questions to ask are: Ø Questions: Ø Correlation between stock returns and retirement intentions Ø Unanticipated changes in wealth could change intentions regarding labor supply and retirement behavior (i.e. a delay vs. early retirement) Ø What s the role of house (real asset) prices / enterprises Ø Drivers of potential relationships (wealth shocks, employment shocks, optimisim / pessimism) 3
Topic W1: What s driving retirement intentions? Student s Task Ø In the master thesis, the student could use the Health and Retirement Study to answer the questions outlined above. Ø The HRS contains detailed information about individuals wealth, income, and demographic characteristics, measures of retirement intentions (the probability of working after age 62, the probability of working after age 65, and the expected retirement age), as well as cognitive ability and health indicators. Ø Student s task is to first summarize the literature on retirement intentions with a focus on the role of financial markets, and, derive hypotheses with regard to the above mentioned questions and run the necessary analysis using the survey data. Ø Programming skills or experience with statistics software like STATA would be very helpful. Ø RAND HRS Data Files: https://www.rand.org/labor/aging/dataprod/hrs-data.html Ø Survey of Consumer Finances: http://www.federalreserve.gov/econresdata/scf/scfindex.htm Data 4
Topic W1: What s driving retirement intentions? Introductory literature Butrica, Iams, Smith, and Toder. 2009. The Disappearing Defined Benefit Pension and Its Potential Impact on the Retirement Incomes of Baby Boomers. Social Security Bulletin 69(3): 1-27. Christelis, Georgarakos, and Haliassos (2013), Differences In Portfolios Across Countries: Economic Environment Versus Household Characteristics, The Review of Economics and Statistics, March 2013, 95(1): 220 236 Goda, Shloven, and Slavov (2011), What Explains Changes in Retirement Plans during the Great Recession? American Economic Review: Papers & Proceedings 2011, 101:3, 29 34 Goda, Shloven, and Slavov (2012) Does stock market performance influence retirement intentions?, NBER working paper. Malmendier and Nagel (2011) Depression babies: do macroeconomic experiences affect risk taking? The Quarterly Journal of Economics (2011) 126, 373 416. 5
Topic W2: Retirement intentions - Differences across countries Topic description Ø Christelis, Georgarakos, and Haliassos (2013) use cross-country microdata and counterfactual methods to document international differences in ownership and holdings of stocks, private businesses, homes, and mortgages among older households in thirteen countries. Ø Malmendier and Nagel (2011) show that individual experiences of macroeconomic shocks affect financial risk taking. They find that individuals who have experienced low stock market returns throughout their lives so far report lower willingness to take financial risk, are less likely to participate in the stock market, invest a lower fraction of their liquid assets in stocks if they participate, and are more pessimistic about future stock returns Ø THE SHARE and HRS datasets consist of households aged 50 and above. Therefore, theses data sets provide an ideal opportunity to examine the impact of different pension systems on international differences in asset holdings Ø For example, larger investments in stocks or in homes in one country relative to another may be reflecting generally lower levels of pension wealth in that country. Ø Using panel data from the Health and Retirement Study (1992 to 2014) this master thesis should investigate the impact of differing pension systems and economic strength on portfolio compositions and retirement intentions across countries 6
Topic W2: Retirement intentions - Differences across countries Topic description Ø Natural questions to ask are: Ø Questions: Ø Differences in pension systems on retirement decisions and portfolio compositions Ø Influence of pension levels on retirement decisions and portfolio compositions Ø Influence of economic strength, levels and changes in GDP on retirement intentions Ø Drivers of potential relationships (optimisim / pessimism, financial literacy, trust, cognitive ability) 7
Topic W2: Retirement intentions - Differences across countries Student s Task Ø In the master thesis, the student could use survey datasets like the HRS or SHARE to answer the questions outlined above. Ø These surveys contain very detailed information on a household's financial and socio-economic situation, financial literacy, and cognitive abilities Ø Student s task is to first summarize the literature on cross-country differences and the influence of pension systems and assets with regard to the above mentioned questions and run the necessary analysis using the survey data. Ø Programming skills or experience with statistics software like STATA would be very helpful. Data Ø Eleven European countries, the Survey of Health, Ageing and Retirement in Europe (SHARE); https://www.centerdata.nl/en/databank/share-project-data-0 Ø United States, the Health and Retirement Study (HRS); https://www.rand.org/labor/aging/dataprod/hrsdata.html 8
Topic W2: Retirement intentions - Differences across countries Introductory literature Christelis, Georgarakos, and Haliassos (2013), Differences In Portfolios Across Countries: Economic Environment Versus Household Characteristics, The Review of Economics and Statistics, March 2013, 95(1): 220 236 Also take a look at the Internet Appendix of this paper! Goda, Shloven, and Slavov (2011), What Explains Changes in Retirement Plans during the Great Recession? American Economic Review: Papers & Proceedings 2011, 101:3, 29 34 Malmendier and Nagel (2011) Depression babies: do macroeconomic experiences affect risk taking? The Quarterly Journal of Economics (2011) 126, 373 416. Chater, Huck, and Inderst (2010) Consumer Decision-Making in Retail Investment Services A Behavioural Economics Perspective Changwony, Campbell, and Tabner (2015 RoF) Social Engagement and Stock Market Partcipation Balloch, Nicolae and Philip (2015) Stock Market Literacy, Trust, and Participation Review of Finance (2015) 19: pp. 1925 1963 9
Thanks for your attention! Questions?