James Choi is Professor of Finance at the Yale School of Management. His primary research is in household finance and behavioral finance; his work on automatic enrollment has led to changes in pension plan design around the world. He has also published research on the effects of social identity and how to use psychology to increase preventive health behaviors.
Professor Choi is a two-time recipient of the TIAA Paul A. Samuelson Award for outstanding scholarly writing on lifelong financial security. He is a Co-Director of the Retirement and Disability Research Center at the National Bureau of Economic Research, an Associate Editor at the Journal of Finance, a member of the American Finance Association’s Ethics Committee, and a TIAA Institute Fellow. He has served on the FINRA Investor Issues Committee. He holds a Ph.D. in economics and an A.B. in applied mathematics from Harvard University.
Today we welcome James Choi, Professor of Finance at the Yale School of Management, to the show to share some of his insight into what he has dubbed practical finance. James has focused his research on behavioural finance, behavioural economics, household finance, capital markets, health economics, and sociology, and is turning this expertise into pragmatic knowledge marketed towards ordinary people. This reframing and reconfiguration of the theory for all people and the decisions they make, could not be more in line with what we are trying to do here at Rational Reminder, and this conversation with James was packed with so many surprising and informative responses to relatable questions. We ask James about index funds, the benefits of advisors, optimal equity, diversification, and much more. We also spend a little bit of time exploring the individual reasons that people have for their decisions, with James expanding on the disconnect between people’s philosophy and their actions. Further topics include the role and impact of education, renting versus buying, and the formulation of his concept of practical finance, so make sure to join us and catch it all.
Key Points From This Episode:
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James Choi — https://faculty.som.yale.edu/jameschoi/
‘Behavioral Household Finance’ — https://www.hbs.edu/ris/Publication%20Files/behavioral_household_finance_a3b33098-e0c7-40e0-bf2f-fa4ceb6e6d06.pdf
‘Finance for the Rest of Us’ — https://www.linkedin.com/posts/james-j-choi-finance_finance-for-the-rest-of-us-activity-6997910789097414656-5epq/?originalSubdomain=ba
‘Popular Personal Financial Advice versus the Professors’ — https://www.aeaweb.org/articles?id=10.1257/jep.36.4.167
‘Millionaires Speak: What Drives Their Personal Investment Decisions?’ — https://www.nber.org/papers/w27969
‘What Matters to Individual Investors? Evidence from the Horse’s Mouth’ — https://onlinelibrary.wiley.com/doi/abs/10.1111/jofi.12895
‘Are Empowerment and Education Enough? Underdiversification in 401(k) Plans’ — https://www.jstor.org/stable/3805120
‘Why Does the Law of One Price Fail? An Experiment on Index Mutual Funds’ — https://www.nber.org/papers/w12261
‘$100 Bills on the Sidewalk: Suboptimal Investment in 401(k) Plans’ — https://www.nber.org/papers/w11554
