Delegated Decision-Making in Finance

63 Pages Posted: 24 Dec 2019

See all articles by Felix Holzmeister

Felix Holzmeister

University of Innsbruck - Department of Economics

Martin Holmen

University of Gothenburg - Department of Economics; University of Gothenburg - Centre for Finance

Michael Kirchler

University of Innsbruck

Matthias Stefan

University of Innsbruck

Erik Wengström

University of Copenhagen - Department of Economics

Date Written: December 5, 2019

Abstract

We run an online experiment with 408 finance professionals (money managers) and 550 subjects from the general population in Sweden (clients). We examine drivers of clients' delegation decisions, differences in decision-making quality between both groups, and professionals' ability to implement investment portfolios that suit the clients' risk attitudes. We find that clients' trust in money managers increases the likelihood of delegating their investment decisions, whereas decision-making quality is associated with a decrease. We further show that decision-making quality of finance professionals is not significantly higher compared to their clients' when controlling for risk taking. Finally, we observe high variability among professionals' perception of delegated risk levels and overlaps in portfolio risk across self-reported risk-levels of clients. This finding indicates that communicating risk between clients and professionals constitutes a potential pitfall in delegated investment decisions.

Keywords: experimental finance, finance professionals, delegated decision-making

JEL Classification: C93, G11, G41

Suggested Citation

Holzmeister, Felix and Holmen, Martin and Kirchler, Michael and Stefan, Matthias and Wengström, Erik, Delegated Decision-Making in Finance (December 5, 2019). Available at SSRN: https://ssrn.com/abstract=3498890 or http://dx.doi.org/10.2139/ssrn.3498890

Felix Holzmeister

University of Innsbruck - Department of Economics ( email )

Universitaetsstrasse 15
Innsbruck, 6020
Austria

HOME PAGE: http://www.holzmeister.biz

Martin Holmen (Contact Author)

University of Gothenburg - Department of Economics ( email )

School of Business, Economics and Law
Box 640
Gothenburg, 40530
Sweden
+46 31 786 6442 (Phone)
+46 31 7865114 (Fax)

University of Gothenburg - Centre for Finance ( email )

Box 640
Gothenburg, 403 50
Sweden

Michael Kirchler

University of Innsbruck ( email )

Universitätsstraße 15
Innsbruck, Innsbruck 6020
Austria

Matthias Stefan

University of Innsbruck ( email )

Universitätsstraße 15
Innsbruck, 6020
Austria

Erik Wengström

University of Copenhagen - Department of Economics ( email )

Øster Farimagsgade 5
Bygning 26
1353 Copenhagen K.
Denmark

HOME PAGE: http://www.econ.ku.dk/wengstrom

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