Title: Style matters: investment performance presentation effects on investor preferences

Authors: Eric Terry; Bettina West

Addresses: Ted Rogers School of Business Management, Ryerson University, 350 Victoria St., Toronto, ON, M5B 2K3, Canada ' Ted Rogers School of Business Management, Ryerson University, 350 Victoria St., Toronto, ON, M5B 2K3, Canada

Abstract: This study examines the influence of investment fund performance presentation format on investor decisions. We perform an experiment in which participants are shown past performance information about two funds one with superior short-term results and the other with better long-term results and asked to choose their preferred option. Results indicate the fund with superior short-term results is chosen more often when short-term performance appears last and the fund with superior long-term performance is chosen more frequently when long-term performance is presented last. This recency effect, in which individuals over-emphasise the last piece of performance data presented to them, is insensitive to simulated market conditions, and disappears entirely when performance results are displayed vertically rather than horizontally. Implications for investors, fund managers and policy makers are discussed.

Keywords: behavioural finance; performance reporting; recency effects; serial order effects; information presentation; investment performance; investor preferences; investment funds.

DOI: 10.1504/GBER.2012.044479

Global Business and Economics Review, 2012 Vol.14 No.1/2, pp.102 - 114

Published online: 29 Jul 2014 *

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