CSMGEP Profile: Vicki Bogan

Understanding Human Behavior and Empowering People

Vicki Bogan knows what traditional models say people should do with their finances. What she’s more interested in is what they actually do.

Bogan, an associate professor at the SC Johnson College of Business at Cornell University, specializes in research at the intersection of household finance and behavioral finance, which seeks to understand people’s decisions about their money.

“Behavioral finance acknowledges from the field of psychology that people have certain psychological blind spots that cause them to make systematic mistakes,” Bogan explains. “And we need to better understand which mistakes are salient and relevant in terms of people’s economic decisions so we can reconcile why people aren’t acting the way the normative models say they should.”

At Cornell’s Institute for Behavioral and Household Finance, which Bogan founded and directs, symposia and white papers take an academic view, but the institute also offers resources for regular folks interested in learning more about managing their household and personal finances, including workshops and cheerful animated videos. That was something Bogan wanted to include in the institute right from the start, and something that’s always had a place in her own career.

“It’s the way I try to help people, and that’s important to me — this is my way of giving back,” she says. “Generally the workshops that I do are really basic. I’m not giving away make-a-million-dollars investment tips. I’m talking about things like budgeting. As an example, I have often done a workshop called ‘What Every College Graduate Needs to Know About Personal Finance.’ It’s really giving people important information that they need right now to help with their household finance management.”

Before she became interested in behavioral finance, though, Bogan was simply interested in math. Her high school didn’t offer an economics class, but she loved numbers, and when she headed to college at Brown University, she saw some exciting possibilities: “I loved the fact that you could use math to model what people did,” she recalls. “And so I came to economics through my love of math.”

From her degree in applied mathematics and economics at Brown, she went on to earn an MBA in finance and strategic management from The Wharton School of the University of Pennsylvania and a master’s and Ph.D. in economics from Brown. Much of her research has focused on filling in two big gaps in traditional economic models: their disregard of market frictions, and their assumption that people always act rationally.

Mental health, for example, is a driving force in many individuals’ decision-making that hasn’t gotten a lot of attention. But Bogan thinks about it a lot.

“Something that I’ve been studying from a lot of different angles is how your mental health affects your financial decisions. How does it affect your portfolio choices? How does it affect your retirement savings?” she explains.

Depression and anxiety, for example, can greatly affect how people manage their retirement, her research has found. There’s a lower probability that people with depression and anxiety will have a voluntary contribution retirement plan, they have lower retirement savings, and there’s a higher probability they’ll make withdrawals from their 401(k) plans.

Recently Bogan has started to look more specifically at how experiencing trauma, including race-based trauma, affects financial decision-making and risk-taking.

“People often think about physical health really influencing your financial decisions,” she says. But I don’t think people have often, or hadn’t until recently, considered how your mental health affects your financial decisions.”

Financial decision-making has been an especially hot topic lately as retail investors — individuals without formal training in finance — have more tools than ever to access markets and financial products with platforms such as Robinhood. In her Ph.D. dissertation, Bogan looked at the rise of internet trading (E-Trade was the behemoth back then) and how it lowered barriers to participation, and it’s been on her radar ever since. In 2021, in the wake of GameStop’s social media fueled roller-coaster ride on the stock market, it crossed the U.S. House Committee on Financial Services’ radar as well, and they invited Bogan to speak about her expertise and concerns about what’s called the “gamification” of finance.

With video game-like interfaces and “behavioral nudges” like push notifications, lists of most-traded stocks, and rewards for completing tasks, online platforms are geared toward making people trade more, which of course makes more money for the platform — but that’s not always in the best interest of the user.

“The problem is that when you make stock trading look like a game, it doesn’t feel like it’s real to people that are using these [platforms],” Bogan explains. “And so they’re making some financial decisions that may be more risky than they realize. It feels like a video game, but you’re actually risking a lot of money.”

In that testimony, as well as in her research, teaching, and workshops for the institute, Bogan aims to use her knowledge to help others get smarter about finance in the real world, which she knows can have real consequences.

“You can make a difference in somebody’s life,” she says. “That’s one of the reasons why I love teaching. People come back and say, ‘Oh, Professor Bogan, you got me on this path, and this has really affected me.’ And those are some of the most gratifying moments in my job.”

Proust Questionnaire
A salon and parlor game of the 19th century made famous by Marcel Proust’s answers, the Proust Questionnaire (adapted here) gets to the heart of things ...

What’s on your nightstand?
My glasses and my iPhone

What job would you like to have if you weren’t an economist?
Documentary film director

What is an ideal day?
Spending the day at an amusement park with my husband and our two sons

What trait do you deplore in other people?
Disrespectfulness, hypocrisy, dishonesty

What trait do you most admire in people?
Humility, compassion

What historical figure do you most admire?
Rosa Parks

What is your favorite extravagance?
Having a spa day

Which talent would you most like to have?
Being able to draw (well)

What’s the hardest thing you’ve ever done? 
The hardest thing I have ever done and am still doing is being a mother.