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Can Security Design Foster Household Risk-Taking?
This paper shows that securities with nonlinear payoff designs can foster household risk-taking. We demonstrate this effect by exploiting the introduction of capital guarantee products in Sweden between 2002 and 2007. Their fast and broad adoption is associated with an increase in expected financial portfolio returns. The effect is especially strong for households with low-risk appetite ex ante. These empirical facts are consistent with a life-cycle model in which households have pessimistic beliefs or preferences combining loss aversion and narrow framing. Our results illustrate how security design can mitigate behavioral biases to increase mean household portfolio returns.
Ketersediaan
| Call Number | Location | Available |
|---|---|---|
| PSB lt.dasar - Pascasarjana | 1 |
| Penerbit | USA: The American Finance Association 2023 |
|---|---|
| Edisi | Volume 78, Issue 4, August 2023, Pages 1917-1966 |
| Subjek | Financial markets Securities Portfolio management Risk taking |
| ISBN/ISSN | 1540-6261 |
| Klasifikasi | NONE |
| Deskripsi Fisik | First Published: 23 April 2023 |
| Info Detail Spesifik | The Journal of Finance |
| Other Version/Related | Tidak tersedia versi lain |
| Lampiran Berkas |