You Can't Always Get What You Want---An Experiment on Finance Professionals' Decisions for Others

59 Pages Posted: 29 Jan 2023

See all articles by Matthias Stefan

Matthias Stefan

University of Innsbruck

Martin Holmen

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

Felix Holzmeister

University of Innsbruck - Department of Economics

Michael Kirchler

University of Innsbruck

Erik Wengström

Department of Economics, Lund University; Hanken School of Economics - Helsinki Graduate School of Economics

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Abstract

We run an investment experiment with 408 finance professionals (agents) and 550 participants from the general population (clients). We vary the mode of decision-making (investment on one’s own account vs. on behalf of clients) and the agents' incentives (aligned vs. fixed). We find that finance professionals show higher decision-making quality than participants from the general population when investing for themselves. However, when deciding for clients, professionals' decision-making quality does not differ from their clients, irrespective of incentives. Our results further identify challenges in risk communication, as professionals’ portfolios show considerable overlaps in portfolio risk across risk levels requested by clients.

Keywords: Experimental finance, finance professionals, delegated decision-making, risk communication

Suggested Citation

Stefan, Matthias and Holmen, Martin and Holzmeister, Felix and Kirchler, Michael and Wengström, Erik, You Can't Always Get What You Want---An Experiment on Finance Professionals' Decisions for Others. Available at SSRN: https://ssrn.com/abstract=4342023 or http://dx.doi.org/10.2139/ssrn.4342023

Matthias Stefan

University of Innsbruck ( email )

Universitätsstraße 15
Innsbruck, 6020
Austria

Martin Holmen

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

Felix Holzmeister

University of Innsbruck - Department of Economics ( email )

Universitaetsstrasse 15
Innsbruck, 6020
Austria

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

Michael Kirchler (Contact Author)

University of Innsbruck ( email )

Innsbruck
Austria

Erik Wengström

Department of Economics, Lund University ( email )

P.O. Box 7082
S-220 07 Lund
Sweden

HOME PAGE: http://https://sites.google.com/site/erikwengstrom

Hanken School of Economics - Helsinki Graduate School of Economics ( email )

Helsinki
Finland

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