MyPortfolio: The IKEA effect in financial investment decisions

Fabian Brunner, Fabian Gamm and Wladislaw Mill

Journal of Banking & Finance, 2023, vol. 154, issue C

Abstract: Creating your own financial portfolio has never been easier than today. While 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 versus a not self-built financial portfolio? 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 corresponding attachment. 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 (search for similar items in EconPapers)
JEL-codes: C91 G11 G41 G50 (search for similar items in EconPapers)
Date: 2023
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Working Paper: MyPortfolio: The IKEA Effect in Financial Investment Decisions (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:154:y:2023:i:c:s0378426622001236

DOI: 10.1016/j.jbankfin.2022.106529

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