Narrow framing and under-diversification: Empirical evidence from Chinese households

Yuxin Xie, Ruohua Tang, Athanasios A. Pantelous and Xiaomeng Lu

China Economic Review, 2024, vol. 83, issue C

Abstract: Using unique survey data from the China Household Finance Survey, we estimate the extent of “narrow framing”, which is a widely documented behavioral bias, among Chinese households, using their portfolio choices. Conditional on stock market participation, we find that most Chinese households exhibit significant narrow framing. Based on the obtained estimates, we show that narrow framing positively predicts the extent of under-diversification. Most importantly, we argue that narrow framing is an irreplaceable of understanding households' portfolio choices, even after considering measurement error and a wide set of indicators of diversification.

Keywords: Survey data; Narrow framing; Chinese households; Portfolio diversification; Behavioral economics (search for similar items in EconPapers)
JEL-codes: D91 G11 G5 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:chieco:v:83:y:2024:i:c:s1043951x23001803

DOI: 10.1016/j.chieco.2023.102095

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