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Internal locus of control is an important personality trait strongly related to many economic outcomes. We show that the probability to own equity and the share of equity in household portfolios increase with people’s internal locus of control. We explore, and find no evidence for, the hypothesis that this relation is driven by a link between internal economic locus of control and subjective expectations about the return and risk of investment in equity. The relation between locus of control and investment in equity also remains after controlling for risk and time preferences, financial literacy, overconfidence, optimism, trust, and other personality traits. We also show that locus of control has a stronger relation with investment in equity for financially illiterate investors. Our results document a strong and robust relation between locus of control and investment behaviour that cannot be explained by leading behavioural investment theories.

A substantial share of university instruction happens in tutorial sessions— small group instruction given parallel to lectures. In this paper, we study whether instructors with a higher academic rank teach tutorials more effectively in a setting where students are randomly assigned to tutorial groups. We find this to be largely not the case. Academic rank is unrelated to students’ current and future performance and only weakly positively related to students’ course evaluations. Building on these results, we discuss different staffing scenarios that show that universities can substantially reduce costs by increasingly relying on lower-ranked instructors for tutorial teaching.

Using representative household panel data, we show that the investment behavior of households is related to the economic locus of control of household heads. A household’s internal locus of control in economic issues is positively related to its decision to hold risky assets as well as its share of risky investments. We find evidence that these relations are due to a lower perception of the risk of investing in risky assets: Those who have an internal economic locus of control perceive less variance in risky assets, which makes these assets more attractive. The relation between investment in risky assets and locus of control cannot be explained by risk and time preferences or by personality traits such as optimism and the Big Five traits. Furthermore, the relation is independent of household socioeconomic background in terms of wealth or knowledge — it holds for sophisticated and unsophisticated households alike.

We develop a measure of (hybrid) defined benefit (DB) pension risk and show how this pension risk affects individual portfolio decisions. We find that people in riskier DB plans are, on average, not only less likely to hold equity but also hold a smaller share of their wealth in equity. This relation is stronger for people who are better informed about their pension plan risk, and for retirees. We also check whether pension risk is related to retirement decisions but find no evidence to support this hypothesis. Our main results are robust to a number of model specifications and alternative explanations. Our findings suggest that properly funded DB pension plans can increase participants’ welfare by allowing them to seek higher returns in their individual portfolios while at the same time relieving less sophisticated participants from the decisions required by a defined contribution plan.

We extend Becker’s model of discrimination by allowing firms to have discriminatory and favoring preferences simultaneously. We draw the two-preference parallel for the marginal firm, illustrate the implications for wage differentials, and consider the implied long-run equilibrium. In the short-run, wage differentials depend on relative preferences. However, in the long-run, market forces drive out discriminatory but not favoring firms.