Salience Effects in Portfolio Selection

Last registered on May 24, 2021
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Pre-Trial

Trial Information

General Information

Title
Salience Effects in Portfolio Selection
RCT ID
AEARCTR-0005311
Initial registration date
January 17, 2020

Initial registration date is when the trial was registered.

It corresponds to when the registration was submitted to the Registry to be reviewed for publication.

First published
January 17, 2020, 10:45 AM EST

First published corresponds to when the trial was first made public on the Registry after being reviewed.

Last updated
May 24, 2021, 9:59 AM EDT

Last updated is the most recent time when changes to the trial's registration were published.

Locations

Country
Germany
Region

Primary Investigator

Name
Mats Köster
Affiliation
Central European University
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Other Primary Investigator(s)

PI Name
Markus Dertwinkel-Kalt
PI Affiliation
Frankfurt School of Finance and Management
Contact Investigator

Additional Trial Information

Status
Completed
Start date
2020-01-20
End date
2020-02-29
Keywords
Finance & Microfinance
Additional Keywords
Choice under Risk, Salience, Skewness Preferences, Naive Diversification
JEL code(s)
D81
Secondary IDs
Abstract
A large experimental literature on choices between two reduced (or simple) lotteries has documented two robust facts: First, if both lotteries are symmetric, then subjects are typically risk averse; that is, with symmetric risks a large majority of subjects chooses the option with less variance in outcomes. Second, if at least one of the lotteries is skewed, subjects often reveal a preference for positive skewness, which can even result in risk-seeking behavior; that is, a large majority of subjects chooses a sufficiently positively skewed risk even if it is the option with more variance in outcomes.

In this study, we ask how robust the observed patterns in these simple choices are to increasing the complexity of the problem along two dimensions: we increase the number of available options and/or replace the reduced lotteries by portfolios (i.e., convex combinations of reduced lotteries), where the latter means that the final outcomes are not stated, but have to be inferred. The experiment is designed to test the predictions of salience theory of choice under risk (Bordalo et al., 2012) for such portfolio selection problems against those of naive decision rules like the 1/N-heuristic (e.g., Benartzi and Thaler, 2001), which predict that subjects diversify naively by investing equal shares into the available reduced lotteries.
External Link(s)

Registration Citation

Citation
Dertwinkel-Kalt, Markus and Mats Köster. 2021. "Salience Effects in Portfolio Selection." AEA RCT Registry. May 24. https://doi.org/10.1257/rct.5311-2.0
Sponsors & Partners

Sponsors

Experimental Details

Interventions

Intervention(s)
Section 4 of the Pre-Analysis Plan describes the experimental design in detail.
Intervention (Hidden)
Intervention Start Date
2020-01-20
Intervention End Date
2020-02-29

Primary Outcomes

Primary Outcomes (end points)
Indicators of the choice between two or many portfolios (i.e., convex combinations of lotteries) or two reduced lotteries.
Primary Outcomes (explanation)
Section 4 of the Pre-Analysis Plan contains a detailed description of the primary outcomes.

Secondary Outcomes

Secondary Outcomes (end points)
The number of memorized outcomes of the available reduced lotteries.
Secondary Outcomes (explanation)
Section 4 of the Pre-Analysis Plan contains a detailed description of the secondary outcomes.

Experimental Design

Experimental Design
We study the choice between two or many portfolios (i.e., convex combinations of two reduced lotteries). We implement two treatments: one with skewed lotteries (including 12 choices between two portfolios, 12 choices between many portfolios, and 12 choices between two reduced lotteries) and one with symmetric lotteries (including 12 choices between two portfolios, 12 choices between many portfolios, and 6 choices between two reduced lotteries). A detailed description of the experimental design is provided in Section 4 of the Pre-Analysis Plan.
Experimental Design Details
Randomization Method
Randomization done by a computer.
Randomization Unit
Individual
Was the treatment clustered?
Yes

Experiment Characteristics

Sample size: planned number of clusters
300 individuals
Sample size: planned number of observations
9900 choices
Sample size (or number of clusters) by treatment arms
150 individuals in the treatment with skewed lotteries and 150 individuals in the treatment with symmetric lotteries
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
Supporting Documents and Materials
IRB

Institutional Review Boards (IRBs)

IRB Name
IRB Approval Date
IRB Approval Number
Analysis Plan

Analysis Plan Documents

Pre-Analysis Plan

MD5: df5b4341cff2647e376ae5908400281b

SHA1: f088f5f7ab7183d46b2a6be026e147c26f6c344b

Uploaded At: January 17, 2020

Post-Trial

Post Trial Information

Study Withdrawal

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Intervention

Is the intervention completed?
Yes
Intervention Completion Date
January 23, 2020, 12:00 +00:00
Data Collection Complete
Yes
Data Collection Completion Date
January 23, 2020, 12:00 +00:00
Final Sample Size: Number of Clusters (Unit of Randomization)
296 individuals
Was attrition correlated with treatment status?
No
Final Sample Size: Total Number of Observations
9756 choices
Final Sample Size (or Number of Clusters) by Treatment Arms
146 individuals the treatment skewed and 150 individuals in the treatment symmetric
Data Publication

Data Publication

Is public data available?
No

Program Files

Program Files
Reports, Papers & Other Materials

Relevant Paper(s)

Reports & Other Materials