Measuring Investor's Risk-, Liquidity and Sustainability Preferences
Advisor: Emanuel Renkl, M.Sc. (please contact emanuel.renkl[at]tum.de)
Start: September/October 2024
Topic
This thesis aims to analyze and measure investor preferences across three key dimensions: risk, liquidity, and environmental, social, and governance (ESG) factors. The study will utilize established frameworks for risk preferences, drawing on both stated and revealed measures, as developed by Falk et al. (2018, 2022) and Holt and Laury (2002). Liquidity preferences will be explored through the foundational theories of Keynes (1930, 1936), particularly in relation to transaction, precautionary, and speculative motives, with efforts focused on identifying empirical measures for these motives. ESG preferences will be examined in the context of social preferences, as suggested by Bauer et al. (2021), with additional reference to Falk et al.'s (2018, 2022) validated measures.
A key component of this thesis will be the search for additional relevant measures in the existing literature. The student will implement and test various measures in a survey experiment to assess their effectiveness in capturing investor preferences across these dimensions. Practical insights from current industry practices, such as robo-advisor onboarding flows, will complement the academic analysis.
Requirements
Interest in Financial, Behavioral and Experimental Economics ; interest in empirical work (data collection and basic statistics); attention to detail.
Literature
- Bauer, R., Ruof, T., & Smeets, P. (2021). Get real! Individuals prefer more sustainable investments. The Review of Financial Studies, 34(8), 3976–4043.
- Charness, G., Gneezy, U., & Imas, A. (2013). Experimental methods: Eliciting risk preferences. Journal of Economic Behavior & Organization, 87, 43–51.
- Falk, A., Becker, A., Dohmen, T., Enke, B., Huffman, D., & Sunde, U. (2018). Global evidence on economic preferences. The Quarterly Journal of Economics, 133(4), 1645–1692.
- Falk, A., Becker, A., Dohmen, T., Huffman, D., & Sunde, U. (2022). An experimentally validated preference survey module. Management Science, 68(4), 2740–2763.
- Frey, R., Pedroni, A., Mata, R., Rieskamp, J., & Hertwig, R. (2017). Risk preference shares the psychometric structure of major psychological traits. Science Advances, 3(10), e1701381.
- Holt, C. A., & Laury, S. K. (2002). Risk aversion and incentive effects. American Economic Review, 92(5), 1644–1655.
- Keynes, J. M. (1930). A Treatise on Money. Macmillan.
- Keynes, J. M. (1936). The General Theory of Employment, Interest, and Money. Macmillan.
Contact & application
If you are interested in writing your master thesis on this topic, please indicate so in your application.