Multi-criteria decision support for investment decisions: Examining the interactive effects of risk profile, information horizon, and prospect format

Clayton Arlen Looney, Andrew M. Hardin

Research output: Chapter in Book/Report/Conference proceedingConference contributionpeer-review

Abstract

Using a psychological approach toward designing a Multi-Criteria Decision Support Systems (MCDSS), three prominent design features - risk profile, information horizon, and prospect format - are embedded in a MCDSS to help users overcome a tendency to build overly conservative investment portfolios. Consistent with myopic loss aversion theory, users exhibit a decreased willingness to take calculated risks when a MCDSS presents risk profiles with more variation and larger probabilities and magnitudes of losses. Such risk profiles prove particularly problematic when extended information horizons (e.g., 10 years) prevail. Regardless of risk profile, a MCDSS can activate heuristic-based decision processes by presenting multi-trial prospects in a manner that overwhelms cognitive capacity. Implications for theory and practice are discussed.

Original languageEnglish
Title of host publicationProceedings of the 48th Annual Hawaii International Conference on System Sciences, HICSS 2015
EditorsTung X. Bui, Ralph H. Sprague
PublisherIEEE Computer Society
Pages1240-1247
Number of pages8
ISBN (Electronic)9781479973675
DOIs
StatePublished - Mar 26 2015
Event48th Annual Hawaii International Conference on System Sciences, HICSS 2015 - Kauai, United States
Duration: Jan 5 2015Jan 8 2015

Publication series

NameProceedings of the Annual Hawaii International Conference on System Sciences
Volume2015-March
ISSN (Print)1530-1605

Conference

Conference48th Annual Hawaii International Conference on System Sciences, HICSS 2015
Country/TerritoryUnited States
CityKauai
Period01/5/1501/8/15

Keywords

  • Information horizon
  • Multi-criteria decision support
  • Myopic loss aversion
  • Prospect format
  • Risk profile

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