We analyze the investment behavior of private clients concerning structured products. To ascertain their stated and revealed preferences, we use a questionnaire and a field experiment, respectively. The real product issued in the field experiment is comparable to one product in the questionnaire...

We conduct controlled experiments in order to analyze individual trading behavior. Our results suggest that investors measure their gains relative to their initial wealth, and that this reference point together with past stock price changes determine the portfolio choices. Subjects choose a...

We argue that the equity premium puzzle stems from a mismatch of applying mental accounting to experiments on risk aversion but not to the standard consumption based asset pricing model. If, as we suggest, one applies mental accounting consistently in both areas the degrees of risk aversions...

The goal of this paper is to assess, for the first time, the empirical impact of "Kaynes' beauty contest", or "higher order belief", on asset price volatility. The paper shows that heterogeneous expectations induce higher order beliefs and that heterogeneous expectation asset pricing models...

We examine the underpricing and long-term performance of a broad set ofSwiss IPOs from 1983 to 2000. The average market adjusted initial return is34.97%. Our results support the ex ante uncertainty hypothesis, the signal-ling hypothesis and, to some extent, the market cyclicality hypothesis...

This paper presents a new method to detect informed trading activities in the options markets.An option trade is identified as informed when it is characterized by an unusual largeincrement in open interest and volume, induces large gains, and is not hedged in the stock market.For the period...

The paper rst shows that nancial market equilibria need not to exist if agents possesscumulative prospect theory preferences with piecewise-power value functions. This is due tothe boundary behavior of the cumulative prospect theory value function, which might causean innite short-selling...

Assuming investors are loss averse, repeated risky investments are less attractive inmyopic evaluation. A theoretical foundation for this effect is given by the behavioralconcept of myopic loss aversion (MLA). The consequences of MLA have been confirmedin several between-subject experimental...

The paper shows that financial market equilibria need not exist if agents possess cumulative prospect theory preferences with piecewise-power value functions. The reason is an infiniteshort-selling problem. But even when a short-sell constraint is added, non-existence can occur due to...

Natural catastrophes attract regularly the attention of media and have become a source of public concern. From a financial viewpoint, natural catastrophes represent idiosyncratic risks,diversifiable at the world level. But for reasons analyzed in this pap er reinsurance markets are unable to...