Influence of the Consideration of Future Consequences on Financial Behavior: The Case of Japanese Individual Investors

Toru Suehiro Toru Suehiro,Toshihiko Takemura Toshihiko Takemura,Koichi Takeda Koichi Takeda,Takashi Kozu Takashi Kozu

doi:10.22610/jebs.v11i4(j).2920

Toru Suehiro Toru Suehiro, Toshihiko Takemura Toshihiko Takemura + Show 2 more

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https://doi.org/10.22610/jebs.v11i4(j).2920

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Abstract

We analyze the impact of the “consideration of future consequences” (CFC) on the amount of financial assets and the liabilities of individual investors by applying a Tobit model to data from a web-based survey. We find that impatient individuals with high CFC have fewer deposits and financial asset balances. We also examine the influence of the CFC-immediate (CFC-I) and CFC-future (CFC-F) sub-indicators often used in psychology as well as CFC on financial asset balances and liabilities. CFC-I show concern with immediate consequences and also an index related to ego depletion. We find that the higher the CFC-I, the lower the amount of deposits and financial asset balances. However, CFC-F is a sub-indicator designating lack of concern with future consequences; thus, the higher the CFC-F, the larger the debt.

Highlights

To investigate the relationship between the various attributes of Japanese individual investors and their investment behavior, we use the “Survey on Japanese Individual Investors’ Financial Behavior” and analyze the data from this survey (Kozu et al, 2012, Takeda et al, 2013)
We analyze the influence of the consideration of future consequences (CFC) on the financial assets owned by individual investors based on demographic parameters from the web-based survey
CFC, CFC-F, and CFC-I differ depending on the explained variables

Summary

Introduction

To investigate the relationship between the various attributes (including psychological tendencies) of Japanese individual investors and their investment behavior, we use the “Survey on Japanese Individual Investors’ Financial Behavior” and analyze the data from this survey (Kozu et al, 2012, Takeda et al, 2013). Following recent studies on behavioral economics and behavioral finance, in conducting behavioral analysis of individual investors, we use data that can be clearly classified by characteristics such as age, gender, holding status of assets, individual feelings, and psychological tendencies. We analyze the influence of the consideration of future consequences (CFC) on the financial assets owned by individual investors based on demographic parameters from the web-based survey. A Tobit model is applied to the results, whose parameters are related to time and money preferences

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