Financial competence, risk presentation and retirement portfolio preferences

Submitted on 7th September 2017

Financial regulators are weighing up the effectiveness of different templates for communicating investment risk to retirement savers since welfare depends on comprehension of risk information. We compare nine standard risk presentations using a discrete choice experiment where subjects choose between three retirement accounts. Switching between graphical or textual presentations, or between formats that emphasize benchmarks rather than return ranges or values at risk, affects predicted choices more than large changes in underlying risk. Innumerate individuals are more susceptible to presentation, and those with weak basic financial literacy are insensitive to increasing risk levels, regardless of presentation. Presentation effects are moderated but not eliminated as financial literacy improves.

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Journal of Pension Economics and Finance
Length of Resource
35 pages
Hazel Bateman, Christine Eckert, John Geweke, Jordan Louviere, Stephen Satchell, Susan Thorp
Date Published
Publication Type
Resource Type