Investment decisions for retirement savings

Publication Type:
Journal Article
Journal of Consumer Affairs, 2010, 44 (3), pp. 463 - 482
Issue Date:
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We conducted a choice experiment to investigate whether retirement savers follow simple portfolio theory when choosing investments. We modeled experimental survey data on 693 participants using a scale-adjusted version of the latent class choice model. Results show that underlying variability in response was explained by age and " risk profile" score and that preferences varied with income and age. Younger individuals were conventionally risk averse, but older, higher-income individuals may react positively to both higher returns and increasing risk, when risk is presented as widening ranges of possible outcomes. Respondents tended to choose among a few similar investment options. Copyright 2010 by The American Council on Consumer Interests.
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