Mental Framing Effects in Dynamic Portfolio Choice

Enrico G. De Giorgi, Thierry Post and Askhat Omar
Additional contact information
Enrico G. De Giorgi: University of St. Gallen - SEPS: Economics and Political Sciences; Swiss Finance Institute
Thierry Post: Graduate School of Business of Nazarbayev University
Askhat Omar: Nazarbayev University - Graduate School of Business

No 25-78, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: We present experimental evidence of systematic decision errors in dynamic portfolio choice. Participants created contingency plans in a lattice model. When returns were independent and identically distributed, most plans were near-optimal for plausible risk preferences. However, under dynamic probabilities, most plans were inefficient, even by First-degree Stochastic Dominance. Allocations showed a lack of sensitivity to probability shifts, consistent with myopic loss aversion. Decision quality improved when participants compared their original plan to precomputed optimal plans. Results highlight the importance of problem framing in dynamic choice and support a libertarian paternalistic approach to choice architecture design.

Keywords: Dynamic portfolio choice; choice experiments; myopic loss aversion (search for similar items in EconPapers)
Pages: 59 pages
Date: 2025-10
New Economics Papers: this item is included in nep-dcm and nep-exp
References: Add references at CitEc
Citations:

Downloads: (external link)
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5216342 (application/pdf)

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:chf:rpseri:rp2578

Access Statistics for this paper

More papers in Swiss Finance Institute Research Paper Series from Swiss Finance Institute Contact information at EDIRC.
Bibliographic data for series maintained by Ridima Mittal ().