Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/250156 
Year of Publication: 
2022
Series/Report no.: 
Working Papers in Economics and Statistics No. 2022-02
Publisher: 
University of Innsbruck, Research Platform Empirical and Experimental Economics (eeecon), Innsbruck
Abstract: 
To study whether clients benefit from delegating financial investment decisions to an agent, we run an investment allocation experiment with 408 finance professionals (agents) and 550 participants from the general population (clients). In several between subjects treatments, we vary the mode of decision-making (investment on one's own account vs. investments on behalf of clients) and the agents' incentives (aligned vs. fixed). We find that finance professionals show higher decision-making quality than participants from the general population when investing on their own account. However, when deciding on behalf of clients, professionals' decision-making quality does not significantly differ from their clients', neither when compensated with a fixed payment nor when facing aligned incentives. Our results further identify a considerable challenge in risk communication between agents and clients: While finance professionals tend to take into account principals' desired risk levels, the constructed portfolios by professionals show considerable overlaps in portfolio risk across different risk levels requested by principals. We argue that this result is due to differences in risk perception.
Subjects: 
Experimental finance
finance professionals
delegated decision-making
risk communication
Document Type: 
Working Paper

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