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MyPortfolio: The IKEA Effect in Financial Investment Decisions

Author

Listed:
  • Fabian Brunner

  • Fabian Gamm

  • Wladislaw Mill

Abstract

Creating your own financial portfolio has never been easier than today. While recent literature shows that people overvalue self-built consumer goods ("IKEA effect") we ask the following question: How do investors value and trade a self-built versus a not self-built financial portfolio? Our pre-registered experimental design allows us to rule out any confounding customization, actual ownership, or learning effects. We find that self-building a portfolio significantly increases corresponding attachment. However, neither valuation of the portfolio nor trading decisions are affected. Thus, our precise estimates suggest that there is no economically relevant "IKEA effect" in Financial investment decisions. These results indicate that common portfolio self-building opportunities per se do not directly distort financial markets.

Suggested Citation

  • Fabian Brunner & Fabian Gamm & Wladislaw Mill, 2022. "MyPortfolio: The IKEA Effect in Financial Investment Decisions," CRC TR 224 Discussion Paper Series crctr224_2022_349, University of Bonn and University of Mannheim, Germany.
    • Handle: RePEc:bon:boncrc:crctr224_2022_349
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    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • G50 - Financial Economics - - Household Finance - - - General

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