This research project decomposes the process of how individual investors make investment decisions. Traditionally, finance theory assumes that individuals can simultaneously consider all possible investments, such as stocks and mutual funds to choose an optimal investment portfolio.
In real life, individuals must simplify their decisions. One way to simplify decision-making is to split the process into two parts. An individual would first create a shortlist of investments to choose from and then select investments from the shortlist.
This research project asks how peers, coworkers, family members, or the media affect the shortlist of potential investments. The project also investigates how shortlisting contributes to wealth inequality and how individuals can make better decisions from their shortlist.