Does the framing of investment portfolios inXuence risk-taking behavior? Some experimental results

I examine the inXuence of the framing of investment portfolios on the risk-taking behavior of individual investors. Investment portfolios can be presented either in aggregated or segregated framing, meaning that either the overall distribution or the single investments of portfolios are displayed. Previous studies have found that simple lottery portfolios are more attractive if their overall distribution is displayed instead of the set of lotteries themselves. Investment portfolios diVer from simple lottery portfolios because they are correlated and ambiguous. Which kind of investment portfolio framing leads to a higher acceptance by individual investors? Three experiments found that ambiguity and correlation of investment portfolios aVect the extent of the framing eVect. Framing eVects are present under ambiguous risk and for positively-correlated portfolios. Furthermore, framing eVects are observed mainly for individuals who decide intuitively rather than analytically. © 2006 Elsevier B.V. All rights reserved. JEL classiWcation: C91; D81; G29; M31 PsycINFO classiWcation: 3920