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Journal of Financial Markets (forthcoming)
We study the impact of style representation on portfolio choice using the choices of the Swedish population in their retirement accounts. We show that investor choice depends on how funds are grouped in the menu (“styles”). An exogenous increase in the style representation increases investment in the funds of the style. By using information on the performance of the funds that the investors choose, we show that the sensitivity to style exposure is negatively related to the investor's degree of informativeness. This suggests that style exposure represents a way of coping with limited (private) information.