Monday, April 13, 2015

Behavioural Economics at Australian Securities and Investments Commission

Very interesting page outlining recent reports commissioned by the Australian Securities and Investments Commission and carried out by the Queensland Behavioural Economics Group
Report 427 Investing in hybrid securities: Explanations based on behavioural economics (REP 427) provides insight into people’s decision making when investing in hybrid securities rather than in bonds and shares. In the experiment QuBE found participants who were subject to an ‘illusion of control’ or ‘overconfidence’ bias relatively increased their hybrid allocation in a mock portfolio. This research complements ASIC’s work on understanding how hybrids are sold to investors and increasing investor education about hybrid risk. The findings are also consistent with earlier research showing a desire for control is a strong driver among SMSF investors when deciding to set up and manage their own super fund. About two-thirds of Australian hybrid investors are SMSF investors.
Report 428 Improving communication with directors of firms in liquidation (REP 428) suggests even small alterations to communication, such as the order of messages in a letter to directors of companies in liquidation, can increase compliance. The report highlights there are likely to be two types of directors who fail to comply: those wishing to comply but who are overwhelmed and those intentionally non-compliant. It identifies opportunities to increase compliance through targeted ‘nudges’ and help for those wishing to comply.

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