Henriette Prast

Financial governance of banking supervision

This article analyses the economics of financing banking supervision and attempts to respond to two questions: What are the most common financing practices? Can the differences in current financing practices be explained by country specific factors? We perform an empirical analysis that identifies the determinants of the financing structure of banks´ prudential supervision using a sample of 90 banking supervisors (central banks and financial authorities). We conclude that supervisors in central banks are more likely publicly funded, while financial authorities are more likely funded via a levy on the regulated banks. The financing rule is also explained by the structure of the financial systems. Public funding is more likely in bank oriented structures. Finally, the geographical factor is also significant: European bank supervisors are more oriented towards the private funding regime. In general, we do not find evidence of the role of the political factor, the size of the economy, the level of development and the legal tradition.

Design and protocol of the weight loss lottery- a cluster randomized trial

People often intend to exercise but find it difficult to attend their gyms on a regular basis. At times, people seek and accept deadlines with consequences to realize their own goals (i.e. commitment devices). The aim of our cluster randomized controlled trial is to test whether a lottery-based commitment device can promote regular gym attendance. The winners of the lottery always get feedback on the outcome but can only claim their prize if they attended their gyms on a regular basis. In this paper we present the design and baseline characteristics of a three-arm trial which is performed with 163 overweight participants in six in-company fitness centers in the Netherlands.

Seven Ways to Knit Your Portfolio: Is Investor Communication Neutral?

The concept of “familiarity” has been used in financial economics to explain apparent paradoxes in people’s behavior, such as the home bias in portfolio choices. In this study, we investigate whether (lack of) familiarity with the language of investor communication may contribute to an explanation of the well-documented gender gap in financial decision-making (i.e. women participate less in the stock market than men and, if they do, they take less risk than men). Using an interdisciplinary framework that combines insights from Behavioral Economics, Finance, Social Psychology and Linguistics, we analyze the metaphors used in websites that target beginning retail investors in three different languages; Dutch, Italian and English UK. We find that in all three languages the metaphors used come from the same conceptual domains; namely, war, health, physical activity, game, farming and the five senses. As these domains refer to worlds that are predominantly and (stereo)typically masculine, we conclude that the language of investor communication may give rise to feelings of familiarity and belonging among men, while creating feelings of distance and non-belonging among women. In other words, just as emotional responses influence risk assessment and return expectations, the language used in financial communication may contribute to explaining the gender gap in stock market participation, risk taking and portfolio choice.

Emotional responses to behavioral economic incentives for health behavior change

Abstract Many people aim to change their lifestyle, but have trouble acting on their intentions. Behavioral economic incentives and related emotions can support commitment to personal health goals, but the related emotions remain unexplored. In a regret lottery, winners who do not attain their health goals do not get their prize but receive feedback on what their forgone earnings would have been. This counterfactual feedback should provoke anticipated regret and increase commitment to health goals. We explored which emotions were actually expected upon missing out on a prize due to unsuccessful weight loss and which incentive-characteristics influence their likelihood and intensity. Participants reported their expected emotional response after missing out on a prize in one of 12 randomly presented incentive-scenarios, which varied in incentive type, incentive size and deadline distance. Participants primarily reported feeling disappointment, followed by regret. Regret was expected most when losing a lottery prize (vs. a fixed incentive) and intensified with prize size. Multiple features of the participant and the lottery incentive increase the occurrence and intensity of regret. As such, our findings can be helpful in designing behavioral economic incentives that leverage emotions to support health behavior change.

Commitment lotteries promote physical activity among overweight adults - A cluster randomized trial

Psychologically designed lottery-deadlines promoted gym attendance among overweight adults. The combination of weekly commitment lotteries and an additional long-term lottery yielded the most durable effects.

The power of percentage: Quantitative framing of pension income

We investigate whether the quantitative frame used to communicate future pension income to plan members matters for perceived pension income adequacy. We allocate plan members randomly to one of four pension income framing conditions: annual pension income, monthly pension income, pension income as percentage of current income, pension income as decimal of current income. We find that expressing projected pension income as a percentage (decimal) of current income significantly increases (decreases) the probability that a plan member perceives the pension income as too low. This effect is robust to adding retirement savings attitude. In addition, we find significant and intuitive effects of household wealth, income, age and education on perceived pension income adequacy. We discuss our findings against the backdrop of previous studies on the effect of numeric frames on perceptions, provide suggestions for further research and draw conclusions for pension communication and survey design.