DAF03 – Personal Finance Decisions, Asset Allocation and Wealth Inequality

Supervisors: Dr Ali Ataullah and Dr Carien van Mourik (Department of Accounting and Finance, The Open University Business School, Faculty of Business and Law)

Mode: Available for campus-based or distance learning.

Background and related literature:

A growing portion of the finance literature focuses on financial decisions by households (for a review, see Gomes et al., 2021). One strand of this literature examines households’ portfolio choices and wealth accumulation (see, for example, Fagereng et al., 2018; Choukhmane et al., 2025). The household finance literature offers two key insights pertaining to personal finance decisions that determine portfolio choices and wealth accumulation.

First, personal finance decisions are difficult for most people. Partly because people are not usually taught how to make financial decisions under uncertainty, partly because financial decisions often involve emotions, and partly because the consequences of important financial decisions materialise later, when it may no longer be possible to correct them. Within this context, Campbell and Ramadorai (2025) argue that the financial system works better for wealthy people who can afford to invest in risky assets and can hire services of professional financial advisors or other financial institutions. However, it is important to note that financial service providers and financial institutions may design financial products and advice that exploit people’s cognitive and/or behavioural weaknesses and products that serve the interests of savvy customers at the expense of other customers (Campbell and Ramadorai, 2025; p. 52).

Second, the literature highlights that although investment in stocks offer a better long-term return compared to many other assets, stock market participation in many countries is usually low. For example, under 30% of the UK population invest in stocks (see, e.g., Changwony et al., 2015). The literature then seeks to examine factors that explain households’ decisions to invest in the stock market. It is also important to note that stock market participation, through its effect on wealth accumulation, plays a key role in determining trends in wealth inequality (see Favilukis, 2013).

The household finance literature tends to focus on the family household as the unit of analysis. However, budding literatures look at factors affecting intrahousehold financial decision-making (discussed in Gomes et al., 2021; pp. 973-974), the gender-wealth gap in single-person households (e.g., Scheebaum et al., 2018), and the impact of disabilities on financial inclusion, investment decisions, income, and wealth (e.g., Wann and Burke-Smalley 2022, Xiao and O’Neill 2022).

Project aims:

Given the above background, the broad aims on this research project are to generate new theoretical and empirical insights related to 

(1) mechanisms designed to support personal financial decisions,

(2) households’ decisions to investment in different types of assets (i.e. households asset allocation decisions),

(3) the role of recent advances in Generative Artificial Intelligence (GenAI) in supporting households’ financial decisions,

(4) the role of government policies in supporting households’ financial decisions and asset allocation, and

(5) the relationship between households’ financial decisions and cross-sectional/intergenerational wealth inequality.

The research proposal:

The candidate is expected to produce a PhD research proposal that is related to the aims outlined above. The proposal must show a good understanding of the theoretical and empirical household finance literature.  This understanding must also inform the proposed research design.

It is strongly recommended that before drafting the research proposal, potential candidates carefully read the review paper by Gomes et al. (2021) and the recent book entitled “Fixed: Why Personal Finance is Broken and How to Make it Work for Everyone” by Campbell and Ramadorai (2025).

Expectation:

Potential candidates must also show some awareness of data sources used in recent empirical studies related to personal finance. The references provided below gives a good guidance on possible data sources.

In addition, the proposal must show awareness of the relevant historical, social, and political context in which personal finance decisions are made.

It is very important that the candidate has good quantitative research skills. They must be able to perform econometric analysis using statistical software such as R, Python, Stata or Julia.

Furthermore, the proposal must show a clear understanding of the independent nature of PhD research and the need to use one’s time efficiently and effectively to complete within three years.

Finally, the proposal must be written in good English and without the use of generative AI.

References:

Campbell, J. Y. (2006). Household finance. The journal of finance, 61(4), 1553-1604.

Campbell, J.Y. and Ramadorai, T. (2025). Fixed: Why Personal Finance is Broken and How to Make It work For Everyone. Princeton and Oxford: Princeton University Press.

Changwony, F. K., Campbell, K., & Tabner, I. T. (2015). Social engagement and stock market participation. Review of Finance, 19(1), 317-366.

Choukhmane, T., Goodman, L., & O’Dea, C. (2025). Efficiency in Household Decision-Making: Evidence from the Retirement Savings of US Couples. American Economic Review, 115(5), 1485-1519.

Fagereng, A., Guiso, L., & Pistaferri, L. (2018). Portfolio choices, firm shocks, and uninsurable wage risk. The Review of Economic Studies, 85(1), 437-474.

Favilukis, J. (2013). Inequality, stock market participation, and the equity premium. Journal of Financial Economics, 107(3), 740-759.

Gomes, F., Haliassos, M., & Ramadorai, T. (2021). Household finance. Journal of Economic Literature, 59(3), 919-1000.

Schneebaum, A., Rehm, M., Mader, K., & Hollan, K. (2018). The gender wealth gap across European countries. Review of Income and Wealth, 64(2), 295-331.

Xiao, J. J., & O’Neill, B. (2022). Disability type, financial capability, and risky asset holding. Journal of Disability Policy Studies, 32(4), 269-279.

Wann, C. R., & Burke-Smalley, L. (2023). Differences in financial inclusion by disability type. International Journal of Bank Marketing, 41(5), 1104-1135.