Do People Understand the Benefit of Diversification?

When consumers forecast the performance of a diversified (vs. undiversified) stock portfolio, two biases are prevalent. First, most people believe diversification increases a portfolio’s expected return. Second, many people believe diversification increases a portfolio’s expected volatility/risk. We examine the processes that underlie these biases and their potential downstream consequences.


Nicholas Reinholtz, Philip Fernbach, and Bart de Langhe (2016) ,"Do People Understand the Benefit of Diversification?", in NA - Advances in Consumer Research Volume 44, eds. Page Moreau, Stefano Puntoni, and , Duluth, MN : Association for Consumer Research, Pages: 190-194.


Nicholas Reinholtz, University of Colorado, USA
Philip Fernbach, University of Colorado, USA
Bart de Langhe, University of Colorado, USA


NA - Advances in Consumer Research Volume 44 | 2016

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