An Experimental Study of Financial Portfolio Selection with Visual Analytics for Decision Support

We investigate the decision process as applied to the practical task of choosing a financial portfolio. We developed PortfolioCompare, an interactive visual analytic decision support tool that helps the consumer quickly create, compare and choose among several portfolios consisting of different financial instruments. PortfolioCompare facilitates the analysis of risk and return aspects of each portfolio considered. We investigate behavior in this task using an economic experiment in which the user actively creates and compares portfolios from a set of funds. We elicit risk preferences using a separate task and find that subjects using PortfolioCompare make decisions that are closer to their risk tolerance as compared to subjects presented with similar information in textual form. This finding suggests that PortfolioCompare helps understand risk aspects of portfolios. Portfolio selections are improved during the course of the decision process, suggesting that this tool is valuable for decision support.

[1]  Haim Levy,et al.  Further Tests of the Separation Theorem and the Capital Asset Pricing Model , 1992 .

[2]  Gokul Bhandari,et al.  Debiasing investors with decision support systems: An experimental investigation , 2008, Decis. Support Syst..

[3]  Miles S. Kimball,et al.  Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Survey , 1995 .

[4]  H. Simon,et al.  Models of Bounded Rationality: Empirically Grounded Economic Reason , 1997 .

[5]  Ned Kock,et al.  Information Overload: A Decision Making Perspective , 2001 .

[6]  W. Cleveland,et al.  Judgments of Circle Sizes on Statistical Maps , 1982 .

[7]  Kristin A. Cook,et al.  Illuminating the Path: The Research and Development Agenda for Visual Analytics , 2005 .

[8]  Sirkka L. Jarvenpaa,et al.  The effect of task demands and graphical format on information processing strategies , 1989 .

[9]  David S. Ebert,et al.  FinVis: Applied visual analytics for personal financial planning , 2009, 2009 IEEE Symposium on Visual Analytics Science and Technology.

[10]  David S. Ebert,et al.  Applied visual analytics for economic decision-making , 2008, 2008 IEEE Symposium on Visual Analytics Science and Technology.

[11]  Charles P. Jones.  Investments: Analysis and Management , 1985 .

[12]  Matthew Chalmers,et al.  Domesticating Bead: adapting an information visualization system to a financial institution , 1997, Proceedings of VIZ '97: Visualization Conference, Information Visualization Symposium and Parallel Rendering Symposium.

[13]  Charlotte H. Mason,et al.  Visual Representation: Implications for Decision Making , 2007 .

[14]  John T. Stasko,et al.  Casual Information Visualization: Depictions of Data in Everyday Life , 2007, IEEE Transactions on Visualization and Computer Graphics.

[15]  G. Stigler.  The Economics of Information , 1961, Journal of Political Economy.

[16]  John T. Stasko,et al.  FundExplorer: supporting the diversification of mutual fund portfolios using context treemaps , 2003, IEEE Symposium on Information Visualization 2003 (IEEE Cat. No.03TH8714).

[17]  Arie E. Kaufman,et al.  FINESSE: a financial information spreadsheet , 1996, Proceedings IEEE Symposium on Information Visualization '96.

[18]  G. Harrison,et al.  Risk Aversion in the Laboratory , 2008 .

[19]  G Gigerenzer,et al.  Reasoning the fast and frugal way: models of bounded rationality. , 1996, Psychological review.

[20]  Dale Goodhue,et al.  Task-Technology Fit and Individual Performance , 1995, MIS Q..

[21]  Andrew Caplin,et al.  Search and Satisficing , 2011 .

[22]  Mark Bailey,et al.  The Grammar of Graphics , 2007, Technometrics.

[23]  Diane M. Strong,et al.  Extending the technology acceptance model with task-technology fit constructs , 1999, Inf. Manag..

[24]  Ben Shneiderman,et al.  LifeLines: visualizing personal histories , 1996, CHI.

[25]  Daniel A. Keim,et al.  Visual Analytics on the Financial Market: Pixel-based Analysis and Comparison of Long-Term Investments , 2008, 2008 12th International Conference Information Visualisation.

[26]  Amnon Rapoport,et al.  Experimental Tests of the Separation Theorem and the Capital Asset Pricing Model , 1988 .

[27]  R. C. Oldfield.  THE PERCEPTION OF CAUSALITY , 1963 .

[28]  Colin Camerer.  An experimental test of several generalized utility theories , 1989 .

[29]  Daniel A. Keim,et al.  Visual Analytics: Definition, Process, and Challenges , 2008, Information Visualization.

[30]  R. Weiner.  Lecture Notes in Economics and Mathematical Systems , 1985 .

[31]  Annamaria Lusardi,et al.  Financial Literacy and Planning: Implications for Retirement Wellbeing , 2005 .

[32]  Martin Bichler,et al.  Design science in information systems research , 2006, Wirtschaftsinf..

[33]  C. Bram Cadsby,et al.  Laboratory experiments in corporate and investment finance: a survey , 1998 .

[34]  Werner Güth,et al.  Illusion of Expertise in Portfolio Decisions: An Experimental Approach , 2001, SSRN Electronic Journal.

[35]  Charles A. Holt,et al.  Risk Aversion and Incentive Effects: New Data without Order Effects , 2005 .

[36]  Dieter W. Fellner,et al.  Trajectory-based visual analysis of large financial time series data , 2007, SKDD.

[37]  David P. Tegarden,et al.  Business Information Visualization , 1999, Commun. Assoc. Inf. Syst..

[38]  Colin Ware,et al.  Information Visualization: Perception for Design , 2000 .