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Does Aggregated Returns Disclosure Increase Portfolio Risk-Taking?

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  • John Beshears
  • James J. Choi
  • David Laibson
  • Brigitte C. Madrian

Abstract

Many previous experiments have found that, consistent with myopic loss aversion, subjects invest more in risky assets if they are given less frequent feedback about their returns, are shown their aggregated portfolio-level (rather than separate asset-by-asset) returns, or are shown long-horizon (rather than one-year) historical asset class return distributions. We study the implications of these results for the effect of financial institutions’ returns disclosure policy on risk-taking. We find that aggregated returns disclosure treatments do not increase portfolio allocations to equity in an experiment where—in contrast to previous experiments—subjects invest in real mutual funds over the course of one year.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16868.

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Date of creation: Mar 2011
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Handle: RePEc:nbr:nberwo:16868

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  1. Choi, James & Madrian, Brigitte & Laibson, David I., 2010. "Why Does the Law of One Price Fail? An Experiment on Index Mutual Funds," Scholarly Articles 4686775, Harvard University Department of Economics.
  2. Glenn Harrison & John List, 2004. "Field experiments," Artefactual Field Experiments 00058, The Field Experiments Website.
  3. Gerlinde Fellner & Matthias Sutter, 2008. "Causes, consequences, and cures of myopic loss aversion - An experimental investigation," Department of Economics Working Papers wuwp116, Vienna University of Economics, Department of Economics.
  4. Laibson, David I. & Madrian, Brigitte C. & Choi, James J., 2009. "Mental Accounting in Portfolio Choice: Evidence from a Flypaper Effect," Scholarly Articles 4686774, Harvard University Department of Economics.
  5. Bellemare, C. & Krause, M. & Kroger, S. & Zhang, C., 2004. "Myopic Loss Aversion: Information Feedback vs. Investment Flexibility," Discussion Paper 2004-32, Tilburg University, Center for Economic Research.
  6. Haigh, Michael S. & List, John A., 2002. "Do Professional Traders Exhibit Myopic Loss Aversion? An Experimental Analysis," Working Papers 28554, University of Maryland, Department of Agricultural and Resource Economics.
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Cited by:
  1. van der Heijden, Eline & Klein, Tobias J. & Müller, Wieland & Potters, Jan, 2012. "Framing Effects and Impatience: Evidence from a Large Scale Experiment," IZA Discussion Papers 7085, Institute for the Study of Labor (IZA).

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