MyPortfolio: The IKEA Effect in Financial Investment Decisions

62 Pages Posted: 19 Jul 2021

See all articles by Fabian Brunner

Fabian Brunner

University of Mannheim - Department of Finance

Fabian Gamm

University of Mannheim - Department of Finance

Wladislaw Mill

University of Mannheim - Department of Economics

Date Written: July 12, 2021

Abstract

Creating an own financial portfolio has never been easier than today. While the recent literature shows that people overvalue self-built consumer goods ("IKEA effect") we ask the following question: How do investors value and trade a self-built financial portfolio compared to one they did not self-build? Our pre-registered experimental design allows us to rule out any confounding customization, actual ownership, or learning effects. We find that self-building a portfolio significantly increases attachment towards it. However, neither valuation of the portfolio nor trading decisions are affected. Thus, our precise estimates suggest that there is no economically relevant "IKEA effect" in financial investment decisions. These results indicate that common portfolio self-building opportunities per se do not directly distort financial markets.

Keywords: IKEA Effect, Self-Building Financial Portfolios, Self-directed Investing, Investment Decisions, Psychological Ownership, Belief Formation, Experimental Finance

JEL Classification: C91, G11, G41, G50

Suggested Citation

Brunner, Fabian and Gamm, Fabian and Mill, Wladislaw, MyPortfolio: The IKEA Effect in Financial Investment Decisions (July 12, 2021). Available at SSRN: https://ssrn.com/abstract=3887657 or http://dx.doi.org/10.2139/ssrn.3887657

Fabian Brunner

University of Mannheim - Department of Finance ( email )

L9, 1-2
Mannheim, 68161
Germany

Fabian Gamm (Contact Author)

University of Mannheim - Department of Finance ( email )

L9,1-2
Mannheim, 68161
Germany

Wladislaw Mill

University of Mannheim - Department of Economics ( email )

D-68131 Mannheim
Germany

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