Risk Presentation and Portfolio Choice

Bateman, H; Eckert, C; Geweke, J; Louviere, J; Satchell, S; Thorp, S

Risk Presentation and Portfolio Choice

Bateman, H Eckert, C

Geweke, J Louviere, J

Satchell, S Thorp, S

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Publication Type:: Journal Article
Citation:: Review of Finance, 2016, 20 (1), pp. 201 - 229
Issue Date:: 2016-03-01

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Field	Value	Language
dc.contributor.author	Bateman, H	en_US
dc.contributor.author	Eckert, C https://orcid.org/0000-0002-8573-6978	en_US
dc.contributor.author	Geweke, J	en_US
dc.contributor.author	Louviere, J https://orcid.org/0000-0001-7688-164X	en_US
dc.contributor.author	Satchell, S	en_US
dc.contributor.author	Thorp, S https://orcid.org/0000-0003-3462-0876	en_US
dc.date.issued	2016-03-01	en_US
dc.identifier.citation	Review of Finance, 2016, 20 (1), pp. 201 - 229	en_US
dc.identifier.issn	1572-3097	en_US
dc.identifier.uri	http://hdl.handle.net/10453/34020
dc.description.abstract	© 2015 The Authors. Efficient investment of personal savings depends on clear risk disclosures. We study the propensity of individuals to violate some implications of expected utility under alternative "mass-market" descriptions of investment risk, using a discrete choice experiment. We found violations in around 25% of choices, and substantial variation in rates of violation, depending on the mode of risk disclosure and participants' characteristics. When risk is described as the frequency of returns below or above a threshold we observe more violations than for range and probability-based descriptions. Innumerate individuals are more likely to violate expected utility than those with high numeracy. Apart from the very elderly, older individuals are less likely to violate the restrictions. The results highlight the challenges of disclosure regulation.	en_US
dc.relation.ispartof	Review of Finance	en_US
dc.relation.isbasedon	10.1093/rof/rfv001	en_US
dc.subject.classification	Finance	en_US
dc.title	Risk Presentation and Portfolio Choice	en_US
dc.type	Journal Article
utslib.citation.volume	1	en_US
utslib.citation.volume	20	en_US
utslib.for	1502 Banking, Finance and Investment	en_US
utslib.for	1501 Accounting, Auditing and Accountability	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Faculty of Business/Economics Discipline
pubs.organisational-group	/University of Technology Sydney/Faculty of Business/Marketing Discipline
pubs.organisational-group	/University of Technology Sydney/Strength - CENSOC - Study of Choice
utslib.copyright.status	closed_access
pubs.issue	1	en_US
pubs.publication-status	Published	en_US
pubs.volume	20	en_US

Abstract:

© 2015 The Authors. Efficient investment of personal savings depends on clear risk disclosures. We study the propensity of individuals to violate some implications of expected utility under alternative "mass-market" descriptions of investment risk, using a discrete choice experiment. We found violations in around 25% of choices, and substantial variation in rates of violation, depending on the mode of risk disclosure and participants' characteristics. When risk is described as the frequency of returns below or above a threshold we observe more violations than for range and probability-based descriptions. Innumerate individuals are more likely to violate expected utility than those with high numeracy. Apart from the very elderly, older individuals are less likely to violate the restrictions. The results highlight the challenges of disclosure regulation.

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10453/34020