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Effects of bonuses ...
Effects of bonuses on diversification in delegated stock portfolio management
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- Hedesström, Martin, 1969 (author)
- Gothenburg University,Göteborgs universitet,Centrum för finans,Psykologiska institutionen,Centre for Finance,Department of Psychology
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- Andersson, Maria, 1977 (author)
- Gothenburg University,Göteborgs universitet,Psykologiska institutionen,Department of Psychology
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- Gärling, Tommy, 1941 (author)
- Gothenburg University,Göteborgs universitet,Centrum för finans,Psykologiska institutionen,Centre for Finance,Department of Psychology
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- Biel, Anders, 1948 (author)
- Gothenburg University,Göteborgs universitet,Psykologiska institutionen,Department of Psychology
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(creator_code:org_t)
- Elsevier BV, 2015
- 2015
- English.
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In: Journal of Behavioral and Experimental Finance. - : Elsevier BV. - 2214-6350. ; 7:September, s. 60-70
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Abstract
Subject headings
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- Our aim is to investigate whether bonuses make stock portfolio managers take higher risks by diversifying less. In two experiments with undergraduates role-playing being professional investors, we test a model implying that they initially anchor on 100% allocation to one of two options delivering the largest bonus payout, then adjust towards allocating equally much to each option (maximal diversification) depending on the degree of perceived uncertainty of the bonus outcome. In Experiment 1 we find as expected that when the bonus is reduced, investment in the preferred option decreases such that diversification increases. Diversification is larger when uncertainty of the bonus outcome is made salient. In Experiment 2weshow that a majority herd strengthens the effect of a bonus for investing in a preferred option despite salient uncertainty of the bonus outcome. In actual stock markets such herding effects would result from investors being similarly rewarded by bonuses.
Subject headings
- SAMHÄLLSVETENSKAP -- Ekonomi och näringsliv -- Nationalekonomi (hsv//swe)
- SOCIAL SCIENCES -- Economics and Business -- Economics (hsv//eng)
- SAMHÄLLSVETENSKAP -- Psykologi -- Tillämpad psykologi (hsv//swe)
- SOCIAL SCIENCES -- Psychology -- Applied Psychology (hsv//eng)
Keyword
- Stock portfolio management; Bonus systems; Risk taking
Publication and Content Type
- ref (subject category)
- art (subject category)
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