The halo effect, private knowledge and retirement fund choice: A theoretical model for the case of Mexico's Afores

Luis Rodríguez-Reyes ()

EconoQuantum, Revista de Economia y Finanzas, 2018, vol. 15, issue 2, 7-20

Abstract: Empirical evidence shows that Mexican workers frequently chose a lower-yielding retirement savings manager over a higher-yielding one, damaging their prospects for retirement income. This research paper shows that such puzzling behavior can occur as a product of the unobservable private history between workers and the companies clustered around a common brand-name, in an example of what is known as the halo effect. To support this hypothesis, a theoretical model of private knowledge and subjective probability with long-term commitment is built. Results are consistent with the idea that private-knowledge-induced halo effect can produce a rational decision process to yield an apparently irrational outcome.

Keywords: Halo effect; retirement; private knowledge; AFORE. (search for similar items in EconPapers)
JEL-codes: D82 G14 G41 H55 J26 (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:qua:journl:v:15:y:2018:i:2:p:7-20

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