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How Much Is Investor Autonomy Worth?

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  • Shlomo Benartzi
  • Richard H. Thaler

Abstract

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.

Suggested Citation

  • Shlomo Benartzi & Richard H. Thaler, 2002. "How Much Is Investor Autonomy Worth?," Journal of Finance, American Finance Association, vol. 57(4), pages 1593-1616, August.
  • Handle: RePEc:bla:jfinan:v:57:y:2002:i:4:p:1593-1616
    DOI: 10.1111/1540-6261.00472
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    References listed on IDEAS

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