The Impact of Presentation Format and Choice Architecture on Portfolio Allocations: Experimental Evidence

35 Pages Posted: 27 Apr 2021

See all articles by Sebastian Bachler

Sebastian Bachler

affiliation not provided to SSRN

Felix Holzmeister

University of Innsbruck - Department of Economics

Michael Razen

affiliation not provided to SSRN

Matthias Stefan

University of Innsbruck

Date Written: April 19, 2021

Abstract

The question of optimal presentation format and choice architecture for investment decisions has gained momentum among researchers, policy makers, and practitioners alike. Motivated by the question how to provide information to investors in a way to improve financial decision-making, we conduct an investment experiment. We implement a 2 × 2 factorial design to test the effect of presentation format (graphical vs. tabular) and choice architecture/complexity (asset selection vs. predefined portfolios) on decision-making quality. Overall, our results suggest a differential effect of presentation format and choice architecture: Firstly, we find that the graphical presentation format lowers decision-making quality when the environment is more complex (asset selection). Secondly, within graphical presentation, decision quality is higher when the choice architecture is simplified (predefined portfolios). In addition, we find that a simplified choice architecture leads to higher risk-adjusted returns and reduces the relevance of fluid intelligence and numeracy for decision-making quality.

Keywords: Investment Decision, Presentation Format, Choice Architecture, Decision-Making Quality, Experimental Finance

JEL Classification: G11, G41, G50

Suggested Citation

Bachler, Sebastian and Holzmeister, Felix and Razen, Michael and Stefan, Matthias, The Impact of Presentation Format and Choice Architecture on Portfolio Allocations: Experimental Evidence (April 19, 2021). Available at SSRN: https://ssrn.com/abstract=3829551 or http://dx.doi.org/10.2139/ssrn.3829551

Sebastian Bachler

affiliation not provided to SSRN

Felix Holzmeister

University of Innsbruck - Department of Economics ( email )

Universitaetsstrasse 15
Innsbruck, 6020
Austria

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

Michael Razen (Contact Author)

affiliation not provided to SSRN

Matthias Stefan

University of Innsbruck ( email )

Universitätsstraße 15
Innsbruck, 6020
Austria

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