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Special Section: Experiments on Learning, Methods, and Voting

Author

Listed:
  • Adriana Breaban
  • Juan Carlos Matallín-Sáez
  • Iván Barreda-Tarrazona
  • Mª Rosario Balaguer-Franch
Abstract
In this experiment, structured funds are sequentially offered to investors as an alternative to bonds. Our results show that the order in which information is presented generates significant biases in decision-making. These biases can have both positive and negative consequences on investors' financial behaviour. In fact, when the investment alternatives are made easier to compare, ‘too good to be true’ offers are more easily spotted. Simultaneously, when funds' expected performance shows an apparently positive trend, funds are more often chosen. The ‘too good to be true’ effect is alleviated by high transparency of the information on the funds return.

Suggested Citation

  • Adriana Breaban & Juan Carlos Matallín-Sáez & Iván Barreda-Tarrazona & Mª Rosario Balaguer-Franch, 2014. "Special Section: Experiments on Learning, Methods, and Voting," Pacific Economic Review, Wiley Blackwell, vol. 19(3), pages 332-354, August.
    • Handle: RePEc:bla:pacecr:v:19:y:2014:i:3:p:332-354
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    File URL: http://hdl.handle.net/10.1111/1468-0106.12069
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    References listed on IDEAS

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    1. Simone Alfarano & Iván Barreda-Tarrazona & Eva Camacho-Cuena, 2006. "On the role of heterogeneous and imperfect information in a laboratory financial market," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 14(4), pages 417-433, December.
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    3. Anufriev, Mikhail & Bao, Te & Sutan, Angela & Tuinstra, Jan, 2019. "Fee structure and mutual fund choice: An experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 158(C), pages 449-474.
    4. James J. Choi & David Laibson & Brigitte C. Madrian, 2010. "Why Does the Law of One Price Fail? An Experiment on Index Mutual Funds," The Review of Financial Studies, Society for Financial Studies, vol. 23(4), pages 1405-1432, April.
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    6. Holmen, Martin & Kirchler, Michael & Kleinlercher, Daniel, 2014. "Do option-like incentives induce overvaluation? Evidence from experimental asset markets," Journal of Economic Dynamics and Control, Elsevier, vol. 40(C), pages 179-194.
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    8. Iván Barreda-Tarrazona & Juan Matallín-Sáez & Mª Balaguer-Franch, 2011. "Measuring Investors’ Socially Responsible Preferences in Mutual Funds," Journal of Business Ethics, Springer, vol. 103(2), pages 305-330, October.
    9. Kliger, Doron & Levy, Ori & Sonsino, Doron, 2003. "On absolute and relative performance and the demand for mutual funds--experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 52(3), pages 341-363, November.
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