Naïve Investment Strategies in Complex Financial Choices
Naïve Investment Strategies in Complex Financial Choices
Author(s): Viera Bačová, Vladimír BalážSubject(s): Economy
Published by: Ekonomický ústav SAV a Prognostický ústav SAV
Keywords: work intensity; poverty; financial difficulties; labour market; Czech Republic; Slovak Republic
Summary/Abstract: This study analysed efficiency of heuristic strategies in complex financial choices. Some 200 naïve investors evaluated 15 financial products with eight attributes. Complex choices developed in two stages. Stage one employed non-compensatory strategies for reducing information burden, eliminating inadequate options and specifying a more narrow decision set. Attribute-based compensatory strategies accounted for a significant majority of strategies in stage two. Naïve decision strategies worked relatively well. Average Sharpe ratios and product ranks were higher than random choices of financial products. The best results were delivered by the normative strategy, however, at the cost of a high information burden.
Journal: Ekonomický časopis
- Issue Year: 63/2015
- Issue No: 06
- Page Range: 599-616
- Page Count: 18