Plenary panel: "Behavioral science and ethical banking"

Plenary panel: "Behavioral science and ethical banking"

25/08/2025

Behavioral finance;FinTech

17:00

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17:30

We analyze a market-wide panel dataset on retail option trading from India, which has an 80% share in option contracts traded worldwide. Retail participation is concentrated in and dominates index options trading. Traders exhibit short-term speculative behavior with significant day trading, short-duration directional bets, especially as options converge to 0DTE, and make significant losses. Three natural experiments show that financial constraints and lottery-like preferences shape investor behavior. An exogenous increase in the supply of short-maturity options induces trading. Lot-size increases and delivery margins trying to curb speculation are offset by speculative shifts to small ticket-size, riskier options. While stock market participation increases welfare in canonical household finance models, it can also entrench speculative behavior that is difficult to undo.

We analyze a market-wide panel dataset on retail option trading from India, which has an 80% share in option contracts traded worldwide. Retail participation is concentrated in and dominates index options trading. Traders exhibit short-term speculative behavior with significant day trading, short-duration directional bets, especially as options converge to 0DTE, and make significant losses. Three natural experiments show that financial constraints and lottery-like preferences shape investor behavior. An exogenous increase in the supply of short-maturity options induces trading. Lot-size increases and delivery margins trying to curb speculation are offset by speculative shifts to small ticket-size, riskier options. While stock market participation increases welfare in canonical household finance models, it can also entrench speculative behavior that is difficult to undo.

Andra Sonea

University of Warwick

Andra Sonea

University of Warwick

Ben Goldin

Plumery B.V.

Ben Goldin

Plumery B.V.

Jakub Wieclaw

Magnetiq Bank

Jakub Wieclaw

Magnetiq Bank

Nagpurnanand Prabhala

Johns Hopkins University

Professor of Finance

Nagpurnanand Prabhala

Johns Hopkins University

Professor of Finance

Bernard Yeung

NUS business school

Professpr

Bernard Yeung

NUS business school

Professpr

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