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The Influence of Information Presentation and Risk Attitude on Asset Allocation in Financial Markets

Jahanshahi, Mahmoud | 2013

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  1. Type of Document: M.Sc. Thesis
  2. Language: Farsi
  3. Document No: 44554 (01)
  4. University: Sharif University of Technology
  5. Department: Industrial Engineering
  6. Advisor(s): Akhavan Niaki, Taghi
  7. Abstract:
  8. In this work, effects of information aggregation on risk attitude of Iranian individuals is being studied through two experiments. In these experiments a risk-free asset with a guaranteed revenue and a risky asset is introduced to each individual. Then the individual has to allocate a certain amount of money between two assets. In both experiments three treatments of control, separation and aggregation are defined in a way that the degree of information aggregation increases respectively. Given the specific treatment assigned to each individual, complementary information is presented, in orderto finalize the decision. Next a financial market simulation for a five year horizon is conducted to calculate the return of individuals’ final allocation. Then the individual states his level of satisfaction towards the decision based on the results of simulation. Analysis shows that in case of graphical and interactive representation of information, information aggregation leads to more risk-taking of individuals. However, in case of descriptive representation of information, such effect does not happen. Moreover, evaluation of each individual on his decisions knowing the results of simulation shows that no matter how the information is represented, the information aggregation leads to less dissatisfaction in loss domain. In addition, in order to identify the underlying mechanisms of risk attitude and satisfaction criteria of individuals, some demographic information is surveyed through the experiments
  9. Keywords:
  10. Asset Allocation ; Financial Market ; Risk ; Information Aggregation ; Regression Analysis

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