An Experimental Survey of Investment Decisions for Retirement Savings

41 Pages Posted: 26 Aug 2010 Last revised: 18 Apr 2011

Hazel Bateman

University of New South Wales (UNSW) - School of Actuarial Studies, Centre for Pensions and Superannuation

Susan Thorp

University of Sydney Business School; Financial Research Network (FIRN); Centre for International Finance and Regulation (CIFR)

Jordan J. Louviere

University of South Australia - Institute for Choice

Towhidul Islam

University of Guelph - Department of Marketing and Consumer Studies

Stephen E. Satchell

University of Cambridge - Faculty of Economics and Politics

Date Written: August 25, 2010

Abstract

We conducted a choice experiment to investigate whether retirement savers follow simple portfolio theory when choosing investments. We modeled experimental survey data on 693 participants using a scale-adjusted version of the latent class choice model. Results show that underlying variability in response was explained by age and “risk profile” score, and that preferences varied with income and age. Younger individuals were conventionally risk averse but older, higher income individuals may react positively to both higher returns and increasing risk, when risk is presented as widening ranges of possible outcomes. Respondents tended to choose among a few similar investments options. Findings should assist regulators and providers to target assistance to “at risk” retirement savers.

Keywords: Investment choice, retirement savings, investment risk

JEL Classification: G23, G28, D14

Suggested Citation

Bateman, Hazel and Thorp, Susan and Louviere, Jordan J. and Islam, Towhidul and Satchell, Stephen E., An Experimental Survey of Investment Decisions for Retirement Savings (August 25, 2010). UNSW Australian School of Business Research Paper No. 2010ACTL09. Available at SSRN: https://ssrn.com/abstract=1665943 or http://dx.doi.org/10.2139/ssrn.1665943

Hazel Bateman

University of New South Wales (UNSW) - School of Actuarial Studies, Centre for Pensions and Superannuation ( email )

High Street
Sydney, NSW 2052
Australia

Susan Thorp (Contact Author)

University of Sydney Business School ( email )

P.O. Box H58
Sydney, NSW 2006
Australia
+61 2 9351 6354 (Phone)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Centre for International Finance and Regulation (CIFR) ( email )

Level 7, UNSW CBD Campus
1 O'Connell Street
Sydney, NSW 2000
Australia

Jordan J. Louviere

University of South Australia - Institute for Choice ( email )

Level 13
140 Arthur Street
North Sydney, New South Wales 2060
Australia

Towhidul Islam

University of Guelph - Department of Marketing and Consumer Studies ( email )

50 Stone Road West
Guelph, Ontario
Canada

Stephen E. Satchell

University of Cambridge - Faculty of Economics and Politics ( email )

Austin Robinson Building
Sidgwick Avenue
Cambridge, CB3 9DD
United Kingdom
44 (0)1223 335213 (Phone)
44 (0)1223 335475 (Fax)

HOME PAGE: http://www.econ.cam.ac.uk/faculty/satchell/index.h

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