Samuli Knüpfer

Do Investors Overweight Personal Experience? Evidence from IPO Subscriptions

We find a strong positive link between past IPO returns and future subscriptions at the investor level in Finland. Our setting allows us to trace this effect to the returns personally experienced by investors; the effect is not explained by patterns related to the IPO cycle, or wealth effects. This behavior is consistent with reinforcement learning, where personally experienced outcomes are overweighted compared to rational Bayesian learning. The results provide a microfoundation for the argument that investor sentiment drives IPO demand. The paper also contributes to understanding how popular investment styles develop, and has implications for the marketing of financial products.

Do Retail Incentives Work in Privatizations

20 countries around the world have used incentive packages, including bonus shares and discounts, to attract retail investors to participate in privatizations. Using a unique dataset, we estimate the total cost of incentive packages at approximately

IQ and Mutual Fund Choice

27 billion. The expiration of bonus share plans is associated with a six-day abnormal return of -1.1% and a long-term increase in volume. Incentives have been surprisingly effective in meeting stated privatization objectives. A dollar spent on retail incentives helps to attract about 21 times as many investors as a dollar spent on underpricing. Individual-level analysis shows that flipping is not only much reduced in the short term, but also declines by at least 15% over a period of 1,000 trading days.

Stock ownership and political behavior: Evidence from demutualizations

Using a comprehensive dataset of Finnish males, we study IQ’s influence on mutual fund choice. High-IQ investors are less likely to own balanced funds, actively managed funds, and funds marketed through a retail network. This behavior tends to reduce high-IQ investors’ fund fees. Moreover, within each asset class and service category, and controlling for other investor attributes, high-IQ investors prefer the lowest-fee funds, further reducing the fees incurred. IQ’s effect on fee sensitivity is robust to the addition of fund family dummies, which help control for unobservable service attributes. IQ also influences the fee sensitivity of even the most affluent investors, ruling out wealth-related access to low-fee funds as the explanation for IQ’s relationship to fees.

Equal Opportunity? Gender Gaps in CEO Appointments and Executive Pay

A setting in which customer-owned mutual companies converted to publicly listed firms created a plausibly exogenous increase in stock ownership. We use this shock to identify the effect of ownership of publicly listed shares on political behavior. Using instrumental variable regressions, difference-in-differences analyses, and matching methods, we find the shock changed the way people vote in the affected areas, with the demutualizations being followed by a 1.7–2.7-percentage-point increase in right-of-center vote share. Analyses of demutualizations that did not involve public listing of shares suggest that explanations based on wealth, liquidity, and tax-related incentives do not drive the results, and that the ownership of publicly listed shares was instrumental in generating the increase in conservative voting. This paper was accepted by Gustavo Manso, finance.

Stock ownership and political behavior

Exceptionally rich data from Sweden makes it possible to study the gender gap in executives’ career progression and to investigate its causes. In their forties, female executives are about one-half as likely to be large-company CEOs and about one-third less likely to be high earners than male executives. Abilities, skills, and education likely do not explain these gaps because female executives appear better qualified than males. Instead, slow career progression in the five years after the first childbirth explains most of the female disadvantage. During this period, female executives work on average shorter hours than male executives and are more often absent from work. These results suggest that aspiring women may not reach the executive site without trading off family life.

Peer Performance and Stock Market Entry

A setting in which customer-owned mutual companies converted to publicly listed firms created a plausibly exogenous shock to salience of stock ownership. We use this shock to identify the effect of stock ownership on political behavior. Using IV regressions, difference-in-differences analyses, and matching methods, we find the shock changed the way people vote in the affected areas, with the demutualizations being followed by a 1.7–2.7 percentage points increase in rightof- center vote share. Analyses of demutualizations that did not involve public listing of shares suggest that explanations based on wealth, liquidity, and tax-related incentives do not drive the results.