Risk Information and Retirement Investment Choice Mistakes Under Prospect Theory

Hazel Bateman, Ralph Stevens and Andy Lai

Journal of Behavioral Finance, 2015, vol. 16, issue 4, 279-296

Abstract: We assess alternative presentations of investment risk using a discrete choice experiment which asked subjects to rank three investment portfolios for retirement savings across nine risk presentation formats and four underlying risk levels. Using Prospect Theory utility specifications, we estimate individual-specific parameters for risk preferences in gains and losses, loss aversion, and error propensity variability. Our results support presentations that describe investment risk using probability tails. Risk preferences and error propensity were found to vary significantly across sociodemographic groups and levels of financial literacy. Our findings should assist regulatory efforts to disclose risk information to the mass market.

Date: 2015
References: Add references at CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://hdl.handle.net/10.1080/15427560.2015.1095749 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:hbhfxx:v:16:y:2015:i:4:p:279-296

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/hbhf20

DOI: 10.1080/15427560.2015.1095749

Access Statistics for this article

Journal of Behavioral Finance is currently edited by Brian Bruce

More articles in Journal of Behavioral Finance from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().