Financial decisions are often considered the outcome of a rational analysis of objective economic factors, such as interest rates, inflation and market news. Yet a recent study has shed light on a surprisingly personal aspect that can influence investor behavior: one’s birthday.
The research, entitled I will trade, just not today: Individual investor trading activity around birthdays, conducted by Emanuele Bajo of the University of Bologna, together with Otto Randl and Giorgia Simion of the WU Vienna University of Economics and Business, offers a novel perspective on how predictable and recurring events in a person’s life, such as one’s birthday, can influence his or her investment choices.
The team of researchers examined a large body of data: 1.2 million trades made by some 9,000 individual investors through an Austrian online broker over thirteen years, from 2001 to 2014. This body of information allowed them to observe behavioral patterns that defy conventional expectations about financial decision making.
The results that have emerged are, in fact, as intriguing as they are unexpected. In the three days preceding and three days following an investor’s birthday, there is a significant decrease in trading activity. In concrete terms, this translates into a 12 percent reduction in the number of trades and a 19.6 percent reduction in the value of trades. But that’s not all: the very day of the birthday marks the point of lowest activity, with a marked decline in both the number of trades and the volume of capital moved.
This phenomenon is accentuated at so-called “round-figure birthdays” – 40, 50, 60 years – moments that seem to cause deeper personal reflection or coincide with celebrations to which greater importance is attached, thus more anticipated and organized. In particular, at the age of 40, the reduction in the number of transactions reaches 10.6 percent, almost double what is observed in an ordinary birthday.
The analysis reveals additional interesting nuances. When the birthday falls on a Friday or on the eve of a holiday, trading activity declines further, with an additional 7.5 percent drop in transactions. This suggests that investors tend to prolong the celebration, diverting even more attention from financial issues.
But it is not only the quantity of trading that varies. The study also examined the quality of investment decisions made on the birthday. And, although the results are not always statistically significant, there emerges a tendency for investors to sell at lower prices and buy at higher prices than on other days. A decrease in performance that could indicate less focus or a greater propensity to make hasty decisions.
This research is part of a larger strand of studies exploring the impact of emotions and personal distractions on financial decisions. However, while many previous studies have focused on extraordinary events such as weddings, births or bereavements, the work of Bajo, Randl and Simion shows that even regular, predictable events can have a significant impact on financial behavior.
The implications of these findings are multiple and relevant for both individual investors and financial advisors. Understanding how personal recurrences affect investment choices can help develop more effective strategies to mitigate potential negative effects. For example, it may be advisable to set automatic limits on trades on days close to significant personal events, or to pay special attention to decisions made during these periods.
In conclusion, this study offers a new perspective on the complexity of human financial behavior. It reminds us that despite the apparent rationality of financial markets, investment decisions are deeply rooted in our personal experience and influenced by factors that go far beyond simple economic calculations. Recognizing and understanding these factors can help improve the quality of financial decisions and, ultimately, better manage one’s wealth.9
