Richard H. Thaler delivered his Prize Lecture on 8 December 20167 at the Aula Magna, Stockholm University.

There is a worldwide trend towards defined contribution savings plans, where investors are often able to select their own portfolios. How much is this freedom of choice worth? We present retirement investors with information about the distribution of outcomes they could expect to obtain from the portfolios they picked for themselves, and the same information for the median portfolio selected by their peers. A majority of our survey participants actually prefer the median portfolio to the one they picked for themselves. We investigate various explanations for these findings and offer some evidence that the results are partly attributable to the fact that investors do not have well‐defined preferences.

This paper examines the proposition that fluctuations in discounts on closed end funds are driven by changes in individual investor sentiment toward closed end funds and other securities. The theory implies that discounts on various funds must move together, that new funds get started when seasoned funds sell at a premium or a small discount, and that discounts on the funds fluctuate together with prices of securities affected by the same investor sentiment. The evidence supports these predictions. In particular, we find that discounts on closed end funds narrow when small stocks do well, as would be expected if closed end funds were subject to the same sentiment as small stocks, whim tern. also to be held by individual investors. The evidence thus suggests that investor sentiment affects security returns.

This paper examines the proposition that fluctuations in discounts of closed‐end funds are driven by changes in individual investor sentiment. The theory implies that discounts on various funds move together, that new funds get started when seasoned funds sell at a premium or a small discount, and that discounts are correlated with prices of other securities affected by the same investor sentiment. The evidence supports these predictions. In particular, we find that both closed‐end funds and small stocks tend to be held by individual investors, and that the discounts on closed‐end funds narrow when small stocks do well.