Paola Sapienza Donald C. Curriculum vitae Kellogg bio Financial Trust Index Google Scholar Page Board Member of AFFECT. Published and forthcoming 1. Time Varying Risk Aversion [ Abstract ], with Luigi Guiso and Luigi ZingalesForthcoming, Journal of Financial Economics. We find that both a qualitative and a quantitative measure of risk aversion increase substantially after the crisis.

We also find that individuals whose risk aversion increases sell more stock. We try to identify the cause of this increase by looking at four possible channels suggested by theory: Our data are inconsistent with the first two channels, while they suggest that fear is a potential mechanism that influences financial decisions, whether it does by increasing the curvature of the utility function or the salience of negative outcomes.

Long Term Persistence [ Abstract ], with Luigi Guiso and Luigi ZingalesForthcoming, Journal of European Economic Association. This paper previously circulated with the title "Was Putnam Right? We study whether a positive historical shock can generate long-term persistence in development. We show that Italian cities that achieved self-government in the Middle Ages have a higher level of civic capital today than similar cities in the same area that did not.

The size of this effect increases with the length of the period of independence and its intensity. This effect persists even after accounting for the fact that cities did not become independent randomly. Consistently, we find that fifth-graders in former free city-states exhibit stronger self-efficacy beliefs and that these beliefs are correlated with a higher level of civic capital.

O43, P16, O10 3. Procrastination and Impatience [ Abstract ], with Ernesto Reuben and Luigi ZingalesJournal of Behavioral and Experimental Economics, We use a combination of lab and field evidence to study whether highly-impatient individuals are more likely to procrastinate.

To measure impatience, we elicit individual discount rates by giving participants choices between smaller-sooner and larger-later rewards. To measure procrastination, we record how fast participants complete three tasks: We find that, consistent with the theory, impatient individuals procrastinate more, but only in tasks where there are costs to delay the online game and university application. We find substantial evidence of time inconsistency.

Namely, more than half of the participants who received their check straight away instead of waiting two weeks for a reasonably larger amount, subsequently took more than two weeks to cash it.

Entering a currency union without any political union European countries have taken a gamble: We try to answer this question by analyzing the cross sectional and time series variation in pro-European sentiments in the EU 15 countries. The Maastricht Treaty seems to have reduced the pro-Europe sentiment as does the Eurozone crisis. Yet, in spite of the worst recession in recent history, the Europeans still support the common currency.

The Value of Corporate Culture [ Abstract ], with Luigi Guiso and Luigi ZingalesForthcoming, Journal of Financial Economics We find that proclaimed values appear irrelevant.

We then study how different governance structures impact the ability to sustain integrity as a corporate value. We find that publicly traded firms are less able to sustain it.

Traditional measures of corporate governance do not seem to have much of an impact. How Stereotypes Impair Women's Career in Science [ Abstract ], with Ernesto Reuben and Luigi ZingalesForthcoming, Proceedings of the National Academy of Sciences Women outnumber men in undergraduate enrollments, but they are much less likely than men to major in mathematics or science or to choose a profession in these fields.

Trusting the Stock Market - GUISO - - The Journal of Finance - Wiley Online Library

This outcome often is attributed to the effects of negative sex-based stereotypes. We studied the effect of such stereotypes in an experimental market, where subjects were hired to perform an arithmetic task that, on average, both genders perform equally well. The discrimination survives if performance on the arithmetic task is self-reported, because men tend to boast about their performance, whereas women generally underreport it.

The discrimination is reduced, but not eliminated, by providing full information about previous performance on the task. By using the Implicit Association Test, we show that implicit stereotypes are responsible for the initial average bias in sex-related beliefs and for a bias in updating expectations when performance information is self-reported.

That is, employers biased against women are less likely to take into account the fact that men, on average, boast more than women about their future performance, leading to suboptimal hiring choices that remain biased in favor of men.

Economic Experts versus Average Americanswith Luigi ZingalesAmerican Economic Review Papers and Proceedings, On line Appendix. The Determinants of Attitudes towards Strategic Default on Mortgages [ Abstract ], with Luigi Guiso and Luigi ZingalesJournal of Finance, 68 4August, pp.

This paper previously circulated with the title "Moral and Social Constraints to Strategic Default on Mortgages," Financial Trust Index Working Paper. The willingness to default increases both in the absolute and in the relative size of the home-equity shortfall.

Our evidence suggests that this willingness is affected both by pecuniary and non-pecuniary factors, such as views about fairness and morality. We also find that exposure to other people who strategically defaulted increases the propensity to default strategically because it conveys information about the probability of being sued.

The World Values Survey WVS question on trust has been widely used to study the economic effect of trust. What measure then should we trust to measure trust? In contrast, WVS-like measures capture mostly the belief based component of a trust game. We present evidence from an experiment in which groups select a leader to compete against the leaders of other groups in a real-effort task that they have all performed in the past.

We find that women are selected much less often as leaders than is suggested by their individual past performance. We study three potential explanations for the underrepresentation of women, namely, gender differences in overconfidence concerning past performance, in the willingness to exaggerate past performance to the group, and in the reaction to monetary incentives.

We find that men's overconfidence is the driving force behind the observed prevalence of male representation. What Do Independent Directors Know? Evidence from Their Trading [ Abstract ], with Enrichetta RavinaThe Review of Financial Studies. We compare the trading performance of independent directors and other officers of the firm. We find that independent directors earn positive and substantial abnormal returns when they purchase their company stock, and that the difference with the same firm's officers is relatively small at most horizons.

The results are robust to controlling for firm-fixed effects and to using a variety of alternative specifications. Executive officers and independent directors make higher returns in firms with the weakest governance and the gap between these two groups widens in such firms.

Independent directors who sit on the audit committee earn higher returns than other independent directors at the same firm. Finally, independent directors earn significantly higher returns than the market when they sell the company stock in a window before bad news and around earnings restatements.

Gender differences in financial risk aversion and career choices are affected by testosterone with Dario Maestripieri and Luigi ZingalesAugust 25,Proceeding of the National Academy of Sciences [ PNAS link ]. Time Discounting for Primary and Monetary Rewards [ Abstract ], with Ernesto Reuben and Luigi ZingalesEconomic Letters2: This paper reports a positive and statistically significant relation between the short-term discount rate over a monetary reward and the short-term discount rate over a primary reward chocolate.

This relation is most evident among people who like chocolate and are hungry. This finding suggests that this type of experiments identifies an underling individual trait, consistent with of present-biased preferences.

Cultural Biases in Economic Exchange?

Trusting the Stock Market by Luigi Guiso, Paola Sapienza, Luigi Zingales :: SSRN

How much do cultural biases affect economic exchange? We try to answer this question by using data on bilateral trust between European countries. We document that this trust is affected not only by the characteristics of the country being trusted, but also by cultural aspects of the match between trusting country and trusted country, such as religion, history of conflicts, and genetic and somatic similarities. This effect is stronger for goodsthat are more trust intensive.

Our trusting the stock market journal of finance suggest that perceptions rooted in culture are important and generally omitted determinants of economic exchange. We study experimentally the effect of expectations on whether trust is repaid.

Subjects respond with untrustworthy behavior if they see that little is expected of various investment options in india. This suggests that guilt aversion plays an important role in the repayment of trust.

We evaluate the impact of the Sarbanes-Oxley Act SOX on shareholders by studying the lobbying behavior of investors and corporate insiders in order to affect the final implemented rules under SOX.

Investors lobbied overwhelmingly in favor of strict implementation of SOX, while corporate insiders and business groups lobbied against strict implementation.

Luigi Zingales - Chicago Booth

We identify firms most affected by the law as those whose insiders lobbied against strict implementation. Such firms appear to be characterized by agency problems, rather than motivated by concerns over compliance costs. Analysis of returns in the post-passage implementation period suggests that investors' positive expectations with regards to the effects of these provisions were warranted.

The Stock Market and Corporate Investment: This paper previously circulated with the title "The Real Effects of Investor Sentiment.

Financial Behavior: Players, Services, Products, and Markets - Google Livres

We use discretionary accruals as our proxy for mispricing. Trusting the Stock Market [ Abstract ], with Luigi Guiso and Luigi ZingalesThe Journal of Finance63 6: We study the effect that a general lack of trust can have on stock market participation. In deciding whether to buy stocks, investors factor in the risk of being cheated. The perception of this risk is a function not only of the objective characteristics of the stocks, but also of the subjective characteristics of the investor.

Less trusting individuals latest in nigerian stock exchange less likely to buy stock and, conditional on buying stock, they will buy less. We find evidence consistent with these propositions in Dutch and Italian fx monsoon air rifle review data, as well as in cross country data.

All the evidence suggests that lack of trust could be an forex trading classes in pretoria factor in explaining the limited participation puzzle, especially among more wealthy investors. Culture, Math, and Gender[ Abstract ] [ Supporting Online Materials ] with Luigi Guiso, Ferdinando Monte and Luigi ZingalesScience Analysis of PISA results suggests that the gender gap in math scores disappears in countries with a more gender-equal culture.

Alfred Marshall Lecture -- Social Capital as Good Culture [ Abstract ], with Luigi Guiso and Luigi ZingalesThe Journal of the European Economic AssociationApril-May6 To explain the extremely long-term persistence more than years of positive historical experiences of cooperation Putnamwe model the intergenerational transmission of priors about the trustworthiness of others. We show that this transmission tends to be biased toward excessively conservative priors. As a result, societies can be trapped in a low-trust equilibrium.

In this context, a temporary shock to the return to trusting can have a permanent effect on the level of trust. We validate the model by testing its predictions on the World Values Survey data and the German Socio Economic Worksave pension investment options brochure. We also present some anecdotal evidence that these priors are reflected in novels that originate in different parts of the country.

Does Culture Affect Economic Outcomes?

Published paper available online through the American Economic Association. Economists have been reluctant to rely on culture as a possible determinant of economic phenomena. The notion of culture is so broad and the channels through which it can enter the economic discourse so vague that it is difficult to design testable hypotheses. In this paper we show this does need to be the case. We introduce a narrower definition of culture that allows for a simple methodology to develop and test cultural-based explanations.

We also present several applications of this methodology: Does Local Financial Development Matter? We study the effects of differences in trusting the stock market journal of finance financial development within an integrated financial market. To do so, we construct a new indicator of financial development by estimating a regional effect on the probability that, ceteris paribus, a household is shut off from the credit market. By using this indicator we find that financial development enhances the probability an individual starts his own business, favors entry, increases competition, and promotes growth of firms.

As predicted by theory, these effects are weaker for larger firms, which can more easily raise funds outside of the local area. Overall, the results suggest local financial development is an important determinant of the economic success of an area even in an environment where there are no frictions to capital movements.

The Role of Social Capital in Financial Development [ Abstract ] with Luigi Guiso and 247 15 minute binary options trading ZingalesAmerican Economic ReviewJune94 3: To identify the effect of social capital on financial development, we exploit the well-known differences in social capital BanfieldPutnam across different parts of Italy.

In areas of the country with high levels of social capital, households invest less in cash and more in stock, use more checks, have higher access to institutional credit, and make less use of informal credit. The effect of social capital is stronger where legal enforcement is weaker and among less-educated people. These results are not driven by omitted environmental variables, since we show that the behavior of movers is still affected by the level of social capital present in the province where they were born.

The Effects of Government Ownership on Bank Lending [ Abstract ], Journal of Financial EconomicsMay72 2: Reprinted in Stijn Claessens and Luc Laeven editorsA Reader in International Corporate Finance. World Bank Publications,pp. Published forex brokers with e gold deposits available online through Science Direct. This paper previously circulated with the title "What do State-owned Firms Maximize?

Evidence from the Italian Banks" and "Lending Incentives of State Owned Firms.

This paper uses information on individual loan contracts to study the effects of government ownership on bank lending behavior. State-owned banks charge lower interest rates than do privately owned banks to similar or identical firms, even if firms are able to borrow more from privately owned banks. State-owned banks mostly favor large firms and firms located in depressed areas. The lending behavior of state-owned banks is affected by the electoral results of the party affiliated with the bank: Religion and Economic Attitudes [ Abstract ], with Luigi Guiso and Luigi ZingalesJournal of Monetary EconomicsJanuary50 1: Much of the existing evidence, however, is based on cross-country studies in which this impact is confounded by differences in other institutional factors.

We use the World Values Surveys to identify the relationship between intensity of religious beliefs and economic attitudes, controlling for country fixed effects. We study several economic attitudes toward cooperation, the government, working women, legal rules, thriftiness, and the market economy.

We also distinguish across religious denominations, differentiating on whether a religion is dominant in a country. We find that on average, religious beliefs are associated with "good" economic attitudes, where "good" is defined as conducive to higher per capita income and growth.

Yet religious people tend to be more racist and less favorable with respect to working women. These effects differ across religious denominations. Overall, we find that Christian religions are more positively associated with attitudes conducive to economic growth. The Effects of Banking Mergers on Loan Contracts [ Abstract ], Journal of FinanceFebruary57 1: This paper studies the effects of banking mergers on individual loan borrowers.

Using information on individual loan contracts between banks and companies, I analyze the consequences of banking consolidation on banks' credit policies. I find that i in-market mergers are beneficial to borrowers if these mergers involve the acquisition of banks with small market shares.

In these cases, interest rates charged by the consolidated banks decrease, consistently with the view that horizontal mergers generate efficiency gains. However, as the local market share of the acquired bank increases, the efficiency effect is offset by market power; ii mergers have different distributional effects across borrowers of different sizes; iii small borrowers of target banks are less likely to borrow in the future from the consolidated bank than borrowers of similar banks not involved in mergers.

The decision to deny credit to small borrowers does not seem to be based on the quality of the borrower, confirming potential adverse welfare effects of the banking consolidation on the availability of credit to small businesses. Long-Term Orientation and Educational Performance [ Abstract ], with David Figlio, Paola Giuliano, and Umut OzekWorking Paper, August We use remarkable population-level administrative education and birth records from Florida to study the role of Long-Term Orientation on the educational attainment of immigrant students living in the US.

Controlling for the quality of schools and individual characteristics, students from countries with long term oriented attitudes perform better than students from cultures that do not emphasize the importance of delayed gratification.

These students perform better in third grade reading and math tests, have larger test score gains over time, have fewer absences and disciplinary incidents, are less likely to repeat grades, and are more likely to graduate from high school in four years. Also, they are more likely to enroll in advanced high school courses, especially in scientific subjects.

Parents from long term oriented cultures are more likely to secure better educational opportunities for their children. A larger fraction of immigrants speaking the same language in the school amplifies the effect of Long-Term Orientation on educational performance. We validate these results using a sample of immigrant students living in 37 different countries.

Taste for competition and the gender gap among young business professionals [ Abstract ], with Ernesto Reuben and Luigi ZingalesWorking Paper, November We also find that competitive individuals are more likely to work in high-paying industries nine years later, which suggests that the relation between taste for competition and earnings persists in the long run.

Lastly, we find that the effect of taste for competition emerges over time when MBAs and firms interact with each other. Can we infer social preferences from the lab? Evidence from the trust game [ Abstract ], with Nicole Baran and Luigi ZingalesWorking Paper, August We show that a measure of reciprocity derived from the Berg et al.

By using the Crowne and Marlowe social desirability scale, we do not find any evidence that a desire to conform to social norms distorts results in the lab, yet we do find evidence that it affects results in the field. The Cost of Banking Regulation [ Abstract ], with Luigi Guiso and Luigi ZingalesWorking Paper, February We use exogenous variation in the degree of restrictions to bank competition across Italian provinces to study both the effects of bank regulation and the impact of deregulation.

We find that where entry was more restricted the cost of credit was higher and - contrary to expectations- access to credit lower.

The only benefit of these restrictions was a lower proportion of bad loans. Liberalization brings a reduction in rate spreads and an increased access to credit at the cost of an increase in bad loans. In provinces where restrictions to bank competition were most severe, the proportion of bad loans after deregulation raises above the level present in more competitive markets, suggesting that the pre-existing conditions severely impact the effect of liberalizations.

A Trust Crisis [ Abstract ], with Luigi ZingalesInternational Review of Finance. We conjecture that the changes in economic activity from late to early is due to a drop in trust. We present new survey evidence consistent with this hypothesis. Civic Capital as the Missing Link [ Abstract ], with Luigi Guiso and Luigi Zingales, Handbook of Social Economics, edited by Jess Benhabib, Alberto Bisin and Matthew Jackson, Volume 1, pp.

Published version available online. This chapter reviews the recent debate about the role of social capital in economics. We argue that all the difficulties this concept has encountered in economics are due to a vague and excessively broad definition. We argue that this definition differentiates social capital from human capital and satisfies the properties of the standard notion of capital.

We then argue that civic capital can explain why differences in economic performance persist over centuries and discuss how the effect of civic capital can be distinguished empirically from other variables that affect economic performance and its persistence, including institutions and geography.

Between- and within-sex variation in hormonal responses to economic decision making tests in a large sample of MBA studentswith Dario Maestripieri, Nicole Baran, and Luigi ZingalesSeptember,Stress.

A Description of the Templeton-Chicago MBAs Longitudinal Study [ Abstract ] with Ernesto Reuben and Luigi Zingales January ABSTRACT: This document describes the data analyzed in the Templeton-Chicago MBAs longitudinal study.

My 2 favorite books on Investing in the Stock Market!

The data described in this document are obtained from three different sources: We give a brief overview of each data source, in addition to a detailed description of the data-collection procedures. Discussion of "The Bright Side of Internal Capital Markets" by Naveen Khanna and Sheri TiceJournal of FinanceAugust56 4: Published version available online through Wiley Online Library.

Comments on "Lessons from Case Studies on Large Insolvencies" in Douglas D. Evanoff and George G. Resolving Large Bank Insolvenciespp. Datasets Dataset for paper "The Role of Social Capital in Financial Development," American Economic Review94 3: