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Heuristics in Mutual Fund Consumers' Willingness‐to‐Invest: An Experimental Approach

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  • Jaime F. Lavin
  • Mauricio A. Valle
  • Nicolás S. Magner

Abstract

This paper improves the understanding of heuristics in the choice of mutual funds. We analyze the effect of price‐quality relationship and anchors as heuristics on the evaluation of the willingness‐to‐invest. We perform two studies with graduate students who possess a medium–high level of financial literacy in Chile. In the first study, we find that willingness‐to‐invest increases (decreases) when subjects observe (do not observe) in the market a positive relationship between expense ratios (price) and service quality. In the second study, in the presence of an anchor, the reference price obtained by individuals from the market information loses relevance and the anchor effect predominates. Our results confirm that participants, as consumers of financial services, apply heuristics as groundwork for their investment decisions. These heuristics as a decision making process are useful but do not always lead to the choice of the lowest cost alternative with the highest possible service quality.

Suggested Citation

  • Jaime F. Lavin & Mauricio A. Valle & Nicolás S. Magner, 2019. "Heuristics in Mutual Fund Consumers' Willingness‐to‐Invest: An Experimental Approach," Journal of Consumer Affairs, Wiley Blackwell, vol. 53(4), pages 1970-2002, December.
    • Handle: RePEc:bla:jconsa:v:53:y:2019:i:4:p:1970-2002
    DOI: 10.1111/joca.12279
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    Cited by:

    1. Theodoros Anagnostopoulos & Grigorios L. Kyriakopoulos & Stamatios Ntanos & Eleni Gkika & Sofia Asonitou, 2020. "Intelligent Predictive Analytics for Sustainable Business Investment in Renewable Energy Sources," Sustainability, MDPI, vol. 12(7), pages 1-11, April.
    2. Marcel Piotrowski & Christian Bünnings, 2024. "How heuristics in judgement influence the securities investment decision process," Journal of Financial Services Marketing, Palgrave Macmillan, vol. 29(1), pages 97-105, March.

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