Does Aggregated Returns Disclosure Increase Portfolio Risk-Taking?

47 Pages Posted: 14 Mar 2011

See all articles by John Beshears

John Beshears

Harvard Business School; National Bureau of Economic Research (NBER)

James J. Choi

Yale School of Management; National Bureau of Economic Research (NBER)

David Laibson

Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

Brigitte C. Madrian

Brigham Young University Marriott School of Business; National Bureau of Economic Research (NBER)

Date Written: March 2011

Abstract

Many previous experiments have found that participants invest more in risky assets if they (i) see their returns less frequently, (ii) see portfolio-level returns (rather than individual asset-by-asset returns), or (iii) see long-horizon (rather than one-year) historical asset class return distributions. In contrast, we find that such information aggregation treatments do not increase equity allocations in an experiment where—unlike previous experiments—participants invest in real mutual funds over the course of one year. In a follow-up experiment, we start with the classic Gneezy and Potters (1997) experimental design and modify it step-by-step to move closer to the design of our first experiment. Using this identification strategy, we show that previously documented aggregation effects are not robust to (i) changes in the distribution of the risky asset’s returns and (ii) the introduction of a multi-day delay between the initial portfolio choice and the realization of returns.

Suggested Citation

Beshears, John and Choi, James J. and Laibson, David I. and Madrian, Brigitte C., Does Aggregated Returns Disclosure Increase Portfolio Risk-Taking? (March 2011). NBER Working Paper No. w16868. Available at SSRN: https://ssrn.com/abstract=1784146

John Beshears

Harvard Business School ( email )

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National Bureau of Economic Research (NBER) ( email )

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James J. Choi

Yale School of Management ( email )

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National Bureau of Economic Research (NBER) ( email )

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David I. Laibson

Harvard University - Department of Economics ( email )

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National Bureau of Economic Research (NBER) ( email )

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Brigitte C. Madrian

Brigham Young University Marriott School of Business ( email )

Provo, UT 84602
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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