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Leading edge research into behavioural finance takes a step forward

Actuarial Research CentreAfter a rigorous selection process, we’re delighted to announce that the IFoA’s Actuarial Research Centre (ARC) has awarded a grant to support a significant behavioural finance research programme; specifically focusing on decision-making by institutional investors.

In response to a Call for Research issued last year, the IFoA received 15 proposals from a variety of institutions around the world, including research teams in Australia, China, the US and Hungary. Amongst the submissions were several global partnerships between academia and industry, including a multi-disciplinary cross-section of academics.

The selected research team is comprised of researchers from City, University of London, Ipsos, Leeds University Business School, University of East London and Reverence Limited. The team itself includes Professor Peter Ayton, Dr Iain Clacher, Dr Volker Thoma, Colin Strong and David Calfo, who bring expertise from a range of disciplines.

How does human behaviour affect investment decisions?

As part of our objective to advancing actuarial science in the public interest, this significant research programme aims to explore the decision making of institutional investors and the biases that may affect their investment decisions.  It will have a particular focus on insurers and pension schemes.

By first seeking to establish what rational or optimal investor behaviour could look like in certain economic scenarios, we can start to comprehend the behavioural factors that might cause institutional investors to fall short of this optimum. 

The research team will be investigating a range of issues - from office politics to company culture and conflicts of interest - to better understand how institutional investors can deliver better outcomes for them and their clients.

The expected output of this research is to explicitly draw out some of the key assumptions made about how institutions should behave rationally in certain scenarios and then test their validity. This may provide a better tool kit for actuaries and other professionals in managing risks and making financial projections for these organisations.

We think that the research findings could have the potential to be significant for actuaries working in the areas of investment advice, asset-liability matching, liability-driven investments and investment risk management, within institutional investors, such as insurance companies and defined benefit pension schemes.

Find out more about our research programmes

The ARC is the IFoA’s virtual research centre, convening a global network of partners from business, the actuarial community and academia to deliver industry-relevant, cutting-edge research. Through its research programmes, the ARC seeks to support the IFoA in advancing actuarial science, developing future practice for the actuarial user community and informing public policy.    

More on the behavioural finance research programme

 

Reverence Limited
 

Ipsos MORI