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Financial Competence, Risk Presentation and Retirement Portfolio Preferences

Hazel Bateman (), Christine Eckert, John Geweke, Jordan Louviere (), Stephen Satchell () and Susan Thorp ()
Additional contact information
Hazel Bateman: Centre for Pensions and Superannuation and ARC Centre of Excellence in Population Ageing Research, Australian School of Business, University of New South Wales
Christine Eckert: Centre for the Study of Choice, University of Technology Sydney
Jordan Louviere: Centre for the Study of Choice, University of Technology Sydney
Stephen Satchell: Trinity College, University of Cambridge and University of Sydney

No 201120, Working Papers from ARC Centre of Excellence in Population Ageing Research (CEPAR), Australian School of Business, University of New South Wales

Abstract: Financial regulators are weighing up the effectiveness of different templates for communicating investment risk to retirement savers since welfare depends on comprehension of risk information. We compare nine standard risk presentations using a discrete choice experiment where subjects choose between three retirement accounts. Switching between graphical or textual presentations, or between formats that emphasize benchmarks rather than return ranges or values at risk, affects predicted choices more than large changes in underlying risk. Innumerate individuals are more susceptible to presentation, and those with weak basic financial literacy are insensitive to increasing risk levels, regardless of presentation. Presentation effects are moderated but not eliminated as financial literacy improves.

Keywords: : Discrete choice; risk preference; disclosure; Financial literacy (search for similar items in EconPapers)
JEL-codes: G23 G28 D14 (search for similar items in EconPapers)
Date: 2011-03
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Journal Article: Financial competence, risk presentation and retirement portfolio preferences (2014) Downloads
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