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

Author

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  • Luis Raul Rodriguez Reyes

    (Instituto Tecnologico y de Estudios Superiores de Occidente)

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.

Suggested Citation

  • Luis Raul Rodriguez Reyes, 2018. "The halo effect, private knowledge and retirement fund choice: A theoretical model for the case of Mexico's Afores," EconoQuantum, Revista de Economia y Finanzas, Universidad de Guadalajara, Centro Universitario de Ciencias Economico Administrativas, Departamento de Metodos Cuantitativos y Maestria en Economia., vol. 15(2), pages 7-20, Julio-Dic.
    • Handle: RePEc:qua:journl:v:15:y:2018:i:2:p:7-20
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    File URL: https://econoquantum.cucea.udg.mx/index.php/EQ/article/view/7126
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    File URL: https://econoquantum.cucea.udg.mx/index.php/EQ/issue/view/694
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Halo effect; retirement; private knowledge; AFORE.;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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