PhD thesis Hoffmann: Social Dimensions of Investor Behavior

Traditional finance theories assume that investors only evaluate risk and expected returns when making investment decisions. More recent behavioral finance theories, however, argue that for many investors there is more to investing than only evaluating risk and returns. Examples hereof are investors who only invest in domestic companies or companies that operate in a social responsible way. The thesis of Arvid Hoffmann examines the (personal) needs and behavior of individual investors in The Netherlands and confirms behavioral finance's view.  

The respondents of Hoffmann's online investment survey indicate that besides financial needs, they also strive to satisfy more socially oriented needs through investing. These investors like to identify themselves with other investors and enjoy participating in investment-related conversations. Moreover, these investors consider investing to be a nice free time activity. Hoffmann also investigates the effects of striving to satisfy these different needs on the decision-making behavior of these investors. It is found that investors for whom socially oriented needs are important, also attribute more value to the opinion of others about their investment decisions and also request more information from these others before making their own decisions. Finally, using (multi-agent) computer simulations, the researcher investigates the effect of micro-level investor interactions on macro-level stock market dynamics. The trading and interaction rules of the simulated population of investors in this computer simulation are based on the empirical survey data. The simulation experiments showed that e.g., stock markets with a greater proportion of socially oriented investors display a greater volatility. In this respect, the research on which this thesis reports also contributes to identifying possible causes of recent stock market hypes and crashes, such as the late 1990's Internet hype.


Arvid O. Hoffmann (Eelde, 1981) will be awarded his PhD in economics and business on November 29th 2007 at 4.15 p.m. (Location: Lutherse Kerk, Haddingestraat 23, Groningen). His supervisor is prof. B.W. Lensink. The title of the thesis is: Essays on the social dimensions of investor behavior.

Information: A.O. Hoffmann, phone 050-363 2802, e-mail: a.o.i.hoffmann rug.nl (work)