Advanced Search
MyIDEAS: Login to save this paper or follow this series

Self-selection in risky financial decision-making: An experiment on framing and ?perceived loss? aversion

Contents:

Author Info

Abstract

A major characteristic of financial markets is information asymmetry. To combat its problems principals can use screening. That is, they can offer the clients a menu of contracts and infer their risk level from their choices. If the pattern of choices that clients with different risk level make differs, there is self-selection of clients and screening occurs. We conduct an experiment to address an important question for such settings?does the framing of the offered menu of contracts interfere with the self-selection of clients? The answer is yes. In fact, subjects? choices shift when the same (positive) outcomes of the same menu of contracts are presented in two different frames. Since both frames differ in the ?perceived? reference-point, we propose a theoretical approach that initially follows Prospect Theory to explain our results. Subjects exhibit loss aversion in their perception and assessment of the positive outcomes below the reference-point, and self-selection fails to occur.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www3.uva.es/empresa/uploads/dt_07_10.pdf
Our checks indicate that this address may not be valid because: 404 Not Found. If this is indeed the case, please notify (Fortuna-Lindo, Jose M.)
Download Restriction: no

Bibliographic Info

Paper provided by Interuniversity Research Master and Doctorate Program (with a quality mention of ANECA) on "Business Economics", Universities of Valladolid, Burgos, Salamanca and León (Spain). Until 2008, Interuniversity Doctorate Program (with a quality mention of ANECA) “New trends in Business Administration”, Universities of Valladolid, Burgos, and Salamanca (Spain). Master en Investigación y Programa de Doctorado Interuniversitarios (con mención de calidad de la ANECA) en "Economía de la Empresa", Universidades de Valladolid, Burgos, Salamanca y León (España). Hasta 2008, Programa de Doctorado Interuniversitario (con mención de calidad de la ANECA) “Nuevas Tendencias en Dirección de Empresas”, Universidades de Valladolid, Burgos y Salamanca (España). in its series Working Papers "New Trends on Business Administration". Documentos de Trabajo "Nuevas Tendencias en Dirección de Empresas". with number 2010-07.

as in new window
Length: 15 pages
Date of creation:
Date of revision:
Handle: RePEc:ntd:wpaper:2010-07

Contact details of provider:
Postal: Avda. Valle Esgueva, 6, 47011 Valladolid
Phone: +34 983 420000 ext. 4392
Fax: +34 983 423899
Email:
Web page: http://www3.uva.es/empresa/
More information through EDIRC

Order Information:
Postal: Av. Valle de Esgueva, 6. E-47011-Valladolid (Spain)
Email:

Related research

Keywords: Behavioral finance; Framing; Loss aversion; Reference point; Self-selection; Screening;

Find related papers by JEL classification:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ntd:wpaper:2010-07. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Fortuna-Lindo, Jose M.).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.