When do structured funds become too good to be true?

An experiment

Adriana Breaban, J.C. Matallin-Saez, I. Barreda-Tarrazona, M.R. Balaguer-Franch

Research output: Contribution to journalArticleScientificpeer-review

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.
Original languageEnglish
Pages (from-to)332-354
JournalPacific Economic Review
Volume19
Issue number3
DOIs
Publication statusPublished - Aug 2014
Externally publishedYes

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Experiment
Investors
Decision making
Financial behavior
Transparency
Alternative investments

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Breaban, A., Matallin-Saez, J. C., Barreda-Tarrazona, I., & Balaguer-Franch, M. R. (2014). When do structured funds become too good to be true? An experiment. Pacific Economic Review, 19(3), 332-354. https://doi.org/10.1111/1468-0106.12069
Breaban, Adriana ; Matallin-Saez, J.C. ; Barreda-Tarrazona, I. ; Balaguer-Franch, M.R. / When do structured funds become too good to be true? An experiment. In: Pacific Economic Review. 2014 ; Vol. 19, No. 3. pp. 332-354.
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Breaban, A, Matallin-Saez, JC, Barreda-Tarrazona, I & Balaguer-Franch, MR 2014, 'When do structured funds become too good to be true? An experiment', Pacific Economic Review, vol. 19, no. 3, pp. 332-354. https://doi.org/10.1111/1468-0106.12069

When do structured funds become too good to be true? An experiment. / Breaban, Adriana; Matallin-Saez, J.C.; Barreda-Tarrazona, I.; Balaguer-Franch, M.R.

In: Pacific Economic Review, Vol. 19, No. 3, 08.2014, p. 332-354.

Research output: Contribution to journalArticleScientificpeer-review

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Breaban A, Matallin-Saez JC, Barreda-Tarrazona I, Balaguer-Franch MR. When do structured funds become too good to be true? An experiment. Pacific Economic Review. 2014 Aug;19(3):332-354. https://doi.org/10.1111/1468-0106.12069