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Style representation and portfolio choice

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  • Massa, Massimo
  • Simonov, Andrei
  • Stenkrona, Anders

Abstract

We study the impact of style representation on portfolio choice using the choices of the Swedish population in their retirement accounts. We show that investor choice depends on how funds are grouped in the menu (“styles”). An exogenous increase in the style representation increases investment in the funds of the style. By using information on the performance of the funds that the investors choose, we show that the sensitivity to style exposure is negatively related to the investor׳s degree of informativeness. This suggests that style exposure represents a way of coping with limited (private) information.

Suggested Citation

  • Massa, Massimo & Simonov, Andrei & Stenkrona, Anders, 2015. "Style representation and portfolio choice," Journal of Financial Markets, Elsevier, vol. 23(C), pages 1-25.
    • Handle: RePEc:eee:finmar:v:23:y:2015:i:c:p:1-25
    DOI: 10.1016/j.finmar.2015.02.001
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    Cited by:

    1. Robert L. McDonald & Thomas A. Rietz, 2018. "Ratings and Asset Allocation: An Experimental Analysis," NBER Working Papers 25046, National Bureau of Economic Research, Inc.

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    More about this item

    Keywords

    Style investing; Mutual funds; Individual investors;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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