Finance and Economics Discussion Series (FEDS)

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April 2017

The Display of Information and Household Investment Behavior

Maya Shaton

Abstract:

I exploit a natural experiment to show that household investment decisions depend on the manner in which information is displayed. Israeli retirement funds were prohibited from displaying returns for periods shorter than twelve months. In this setting, the information displayed was altered but the accessible information remained the same. Using differences-in-differences design, I find that this change caused reduction in fund flow sensitivity to past returns, decline in trade volume, and increased asset allocation toward riskier funds. These results are consistent with models of limited attention and myopic loss aversion, and have important implications for households accumulated wealth at retirement.

Accessible materials (.zip)

Keywords: Attention, Household Finance, Information Display, Myopic Loss Aversion, Salience

DOI: https://doi.org/10.17016/FEDS.2017.043

PDF: Full Paper

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Last Update: January 09, 2020