Behavioural insights on individuals’ investment decisions

This dissertation contributes to the household finance literature by empirically examining how social preferences, cultural background, and political beliefs shape retail investors' portfolio decisions. It uses survey data and granular supervisory data across three European settings. Chapter 1 uses a representative Dutch household survey to distinguish between sustainable investors who are primarily financially motivated and those who are primarily socially motivated. The chapter shows that these two groups differ systematically in their individual characteristics. Socially motivated sustainable investors display stronger social preferences, higher levels of education and trust, and are more likely to be left-wing and risk-averse. Financially motivated sustainable investors, by contrast, are more sensitive to recommendations from social media, traditional media, and word of mouth, and have lower social preferences. The chapter also shows that lack of information, and in particular limited sustainable finance literacy, is a key barrier to broader participation in sustainable investing. Chapter 2 studies whether cultural background affects household investments in government bonds. Using confidential Italian supervisory data from bilingual South Tyrol and a difference-in-differences design around the European sovereign debt crisis, the chapter finds that German-speaking households invested approximately 11% less in Italian government bonds, relative to other assets, than Italian-speaking households. The evidence is consistent with cultural differences in attitudes toward public debt shaping retail demand for sovereign securities. Chapter 3 analyzes Italian households' cross-border portfolio adjustments around the Brexit referendum. The chapter shows that investors in more Eurosceptic provinces increased their relative holdings of UK securities, particularly stocks and mutual funds, by approximately 4.5% after the referendum. This finding suggests that political beliefs can shape how households interpret geopolitical shocks and translate those interpretations into international portfolio choices.