Researchers use registers to understand the citizens’ behaviour on the stock markets

Registry data are not only a goldmine for researchers within the fields of health and labour economics; financial economists also benefit from having access to information about the Danes’ behaviour in the financial markets.

Denmark has taken the lead on an international scale when it comes to register-based research. Every day, thousands of pieces of information are collected about Danes, and all this information is stored in numerous registers where it can be accessed by, for instance, university researchers across the country. Registry-based research is typically used to investigate whether there is a relationship between education, health and upbringing.

But now it seems that researchers from other fields have discovered the benefits of registry data. Together with her colleagues Juanna Schröter Joensen and Jesper Rangvid, Professor Charlotte Christiansen from the Department of Economics and Business at Aarhus University has studied how Danes behave in the financial markets. The researchers have done important work towards determining whether individuals behave as the research predicts, and this in turn enables them to examine whether there is a need for improving legislation on stock market investments.

“Instead of using the data to determine whether individuals become unemployed, complete an education or fall ill, we are looking at how individuals tend to act in the financial markets. We have simply used the same information to shed light on another aspect of society,” explains Charlotte Christiansen, who has been granted access to data material drawn from ten per cent of the Danish population.

Specifically, the researchers have shown that men and women behave differently in the financial market depending on whether they are married/living together or not. The researchers were able to study this by examining what happens when an individual gets married or moves in with a partner, or when he or she is divorced or moves out. The study takes into account several background variables. Single men are more inclined towards making risky investments, and with women it is the other way around. When individuals move in together, they tend to adjust towards each other’s preferences. But if they end up getting divorced, they will return to the behaviour they displayed prior to getting married.

Based on the same data set, the researchers have also been able to conclude that people with an education within economics are more likely to hold stocks, even when other background factors are taken into account.

A much better representation of reality
According to Charlotte Christiansen, the main advantage of using registry data is that it gives the researchers an enormous scope to their work. But the use of registry data in financial economics research is still rare.

Generally, very few countries possess as many registers as Denmark, and researchers in other countries often have to resort to questionnaires. This approach is not only costly, there is also a certain degree of uncertainty associated with it.

“Danish society is so well registered that we are able to get very detailed information; for instance, whether individuals own stocks and, if so, what is the exact value of these stocks. We would not be able to perform this type of research without drawing on registry data. For instance, we are able to trace an individual’s behaviour over time. That is far more difficult with a questionnaire, because questionnaire surveys are typically not repeated. But working with these register data allows us to track the development of specific individuals over the course of several years,” explains Charlotte Christiansen and proceeds:

“My colleagues from abroad often look at me with envy when I tell them about the Danish registers. They would like there to be something similar available to them in their home country, but it is simply not possible in all countries.”

Register-based research is the future
It is important to emphasise that these data are anonymous, and the researchers have no way of investigating or identifying specific individuals.

“We have a lot of variables for each individual, and we perform regressions, where we add various explanatory variables. So we do not focus on specific individuals as such. Rather, we match certain groups that share characteristics in order to examine various effects,” says Charlotte Christiansen.

She is absolutely convinced that registry-based research is the way forward. There is nothing to suggest that the number of registers will decline in the future, and therefore the researchers expect to be able to do even more refined analyses in the future. Charlotte Christiansen finds that people’s retirement savings, for instance, is an obvious object for further research. Through the registry data, it will be possible to investigate who is saving up for retirement voluntarily and who needs a gentle nudge in the right direction. And therefore, based on this research, it will be possible to implement targeted political initiatives.

However, Charlotte Christiansen is currently focused on other research projects. In order to be able to move forward with the research on stock holdings, she needs more information. At the moment, she is only able to examine the value of the stocks owned by an individual, but does not have access to the specific composition of that person’s stock portfolio.

“We would like to be able to take a more detailed look at the types of investments that individuals make and investigate whether the level of education has an impact on the stocks that individuals buy and how often they trade them. It would be really exciting. But we have not obtained these data yet.”