Are You Smarter than an Ostrich: Does “Skin in the Game” Influence an Investor’s Portfolio Monitoring Behavior?

• Main Author: Liu, Iris
• Format: Others
• Published: Scholarship @ Claremont 2016
• Subjects: selective exposure; ostrich effect; risk aversion; portfolio monitoring; investments; information utility; Behavioral Economics
• Online Access: http://scholarship.claremont.edu/cmc_theses/1319; http://scholarship.claremont.edu/cgi/viewcontent.cgi?article=2461&context=cmc_theses

Abstract In this paper, we examine the behavior of subjects in a mock financial investment experiment to investigate the effects of “skin in the game” and ego utility on hedonic information acquisition decisions. We observe how often subjects “check” their portfolios after given general market returns, and whether conditions impact the existence and magnitude of the ostrich effect – the tendency to avoid information expected to be negative. When considering these experiment conditions as well as subject sex, risk aversion, curiosity, financial literacy and investing experience, we do not find an ostrich effect. We do find that females check their portfolios more often on average than males. Finally, we find that risk-averse people will check their portfolios more often, regardless of market returns or sex.