Elias Rantapuska: Markets fluctuate, and so do investors
Professor Elias Rantapuska, what do you research and why?
I study the decision-making process of household investors and look at why they participate in the equity market and why they want to invest in specific securities.
We have access to the entire register data of Statistics Finland. This information can be combined with, for example, information from the Finnish Tax Administration, which shows the individual investments, as well as the data from the Defence Forces.
I ended up focusing on this area during my doctoral dissertation, when I noticed that there were many questions in the domain of emerging household finance literature, which had not yet been answered. In finance research, it was only 20 years ago that it began to be understood that not all investor activities can be understood with a rational framework. In addition to reason, people's investment decisions are also guided by emotions, family relationships, colleagues' investments, childhood and adulthood experiences – variables of real life which have had no place in traditional economics.
How did you become a researcher?
After completing my dissertation, I wanted to try working in the business world. This led to an interesting four years of work, but then the newly established tenure track career system for Aalto professors attracted me back to the research world.
What have been the highlights of your career?
Among the greatest moments are when one’s work is published in top journals. This is a concrete recognition that we are doing the right things – when our work passes through the tightest screening process there is.
In one study, I investigated tax optimisation around ex-dividend dates. A second addressed investors' foolishness in subscription rights issues where, for example, money was lost by failing to fill in the questionnaire forms sent to home address. My most recent top publication examined how unemployment experiences during a recession affect one’s willingness to participate in the stock market. We found that people who had a high risk of unemployment in the recession of the 1990s were, 15 years later, less likely to invest in equities regardless of their income and wealth. This meant that the uncertainty remained smouldering under the surface and had a long-term impact on people's behaviour.
What is required from a researcher?
The most important thing is the ability to plan and see very far ahead. In this field, the planning horizon is at least five years – this is how long it takes to get a good idea, get support for it, collect the data, analyse it, write up the results, and publish them. A researcher must therefore be able to deal with uncertainty. Competition is constantly intensifying and the quality or research increases. As a result, focus needs to be on doing less but better – although of course there is never a guarantee that the work will be accepted by the top journals in the field.
What do you expect from the future?
I will certainly continue to get my hands dirty with research tasks. At the same time, I am also the leader of a research group and am increasingly enabling the work of others and also spending more time on administrative tasks.
I would like to see more investors in Finland. After investing in home equity, majority of citizens’ wealth is dormant on bank accounts. In a world of negative interest rates, this is only sensible if you need the money on a week’s notice. Even for someone with a very small risk tolerance, it is more profitable to put this money into work.
Elias Rantapuska and Aalto’s other new tenured professors will speak about their research at the Installation Talks event on 30 October. The presentations are presented in non-technical language and are open to all. See you there! Further information is available here.