How Much is Investor Autonomy Worth?

38 Pages Posted: 21 Dec 2001  

Shlomo Benartzi

University of California at Los Angeles

Richard H. Thaler

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: March 2001

Abstract

There is a worldwide trend towards increasing investor autonomy. Investors are increasingly able to pick their own portfolios. How good a job are they doing? We present individuals saving for retirement with information about the distribution of outcomes they could expect from the portfolios they picked and also the median portfolio selected by their peers. A majority of our survey participants actually prefer the median portfolio to the one they picked for themselves. Furthermore, we find that a majority of investors who preferred to form their own portfolio rather than accept one that was picked for them by a professional investment manager, preferred the distribution of returns implied by the suggested portfolio to the one they selected on their own. We investigate various alternatives to these findings and offer some evidence to support the view that part of the results are attributable to the fact that investors do not have well-defined preferences.

Suggested Citation

Benartzi, Shlomo and Thaler, Richard H., How Much is Investor Autonomy Worth? (March 2001). AFA 2002 Atlanta Meetings. Available at SSRN: https://ssrn.com/abstract=294857 or http://dx.doi.org/10.2139/ssrn.294857

Shlomo Benartzi (Contact Author)

University of California at Los Angeles ( email )

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Richard H. Thaler

National Bureau of Economic Research (NBER)

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University of Chicago - Booth School of Business ( email )

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