TY - JOUR
T1 - When do structured funds become too good to be true?
T2 - An experiment
AU - Breaban, Adriana
AU - Matallin-Saez, J.C.
AU - Barreda-Tarrazona, I.
AU - Balaguer-Franch, M.R.
PY - 2014/8
Y1 - 2014/8
N2 - 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.
AB - 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.
U2 - 10.1111/1468-0106.12069
DO - 10.1111/1468-0106.12069
M3 - Article
SN - 1361-374X
VL - 19
SP - 332
EP - 354
JO - Pacific Economic Review
JF - Pacific Economic Review
IS - 3
ER -