IDEAS home Printed from https://ideas.repec.org/p/chf/rpseri/rp2578.html
   My bibliography  Save this paper

Mental Framing Effects in Dynamic Portfolio Choice

Author

Listed:
  • Enrico G. De Giorgi

    (University of St. Gallen - SEPS: Economics and Political Sciences; Swiss Finance Institute)

  • Thierry Post

    (Graduate School of Business of Nazarbayev University)

  • Askhat Omar

    (Nazarbayev University - Graduate School of Business)

Abstract

We present experimental evidence of systematic decision errors in dynamic portfolio choice. Participants created contingency plans in a lattice model. When returns were independent and identically distributed, most plans were near-optimal for plausible risk preferences. However, under dynamic probabilities, most plans were inefficient, even by First-degree Stochastic Dominance. Allocations showed a lack of sensitivity to probability shifts, consistent with myopic loss aversion. Decision quality improved when participants compared their original plan to precomputed optimal plans. Results highlight the importance of problem framing in dynamic choice and support a libertarian paternalistic approach to choice architecture design.

Suggested Citation

  • Enrico G. De Giorgi & Thierry Post & Askhat Omar, 2025. "Mental Framing Effects in Dynamic Portfolio Choice," Swiss Finance Institute Research Paper Series 25-78, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp2578
    as

    Download full text from publisher

    File URL: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5216342
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:chf:rpseri:rp2578. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ridima Mittal (email available below). General contact details of provider: https://edirc.repec.org/data/fameech.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.