MyPortfolio: The IKEA Effect in Financial Investment Decisions

Creating an own financial portfolio has never been easier than today. While the 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 financial portfolio compared to one they did not self-build? 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 attachment towards it. 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.

Keywords: IKEA Effect, Self-Building Financial Portfolios, Self-directed Investing, Investment Decisions, Psychological Ownership, Belief Formation, Experimental Finance

JEL Classification: C91, G11, G41, G50

Suggested Citation: Suggested Citation

Brunner, Fabian and Gamm, Fabian and Mill, Wladislaw, MyPortfolio: The IKEA Effect in Financial Investment Decisions (July 12, 2021). Available at SSRN: https://ssrn.com/abstract=3887657 or http://dx.doi.org/10.2139/ssrn.3887657