A recent theory by Gennaioli, Shleifer, and Vishny (2015) proposes that trust is an important component for delegated investing. This paper tests the theory in a laboratory experiment. Participants first play a trust game. Participants then act as investors who have to make two separate,...

Gold objects have existed for thousands of years but for many investors gold has only recently become a tradable investment opportunity. Gold has been described as an inflation hedge, a “golden constant”, with a long run real return of zero. Yet over 1, 5, 10, 15 and 20 year investment...

Stock characteristics have two sources of predictive power. First, a characteristic might be valuable in identifying high or low expected returns across industries. Second, a characteristic might be useful in identifying individual stock expected returns within an industry. Past studies...

In this era of inexpensive computation and vast data, systematic, or algorithmically driven, investment is increasingly popular. Systematic strategies appear in stand-alone products as well in tail-hedging and defensive-overlay strategies. Indeed, given the enormous growth in data, it is...

The disposition effect is implicitly assumed to be constant over time. However, drivers of the disposition effect (preferences and beliefs) are rather countercyclical. We use individual investor trading data covering several boom and bust periods (2001-2015). We show that the disposition effect...

Do women invest differently than men? We contribute to the answer of this question by analysing the Panel on Household Finances (PHF) of the German Bundesbank. This representative panel collects a wide variety of behavioural and financial variables in the area of household finance. We find that...

This paper evaluates numerous diversification strategies as a possible remedy against widespread costly investment mistakes of individual investors. Our results reveal that a very broad range of simple heuristic allocation schemes offers similar diversification gains, as well-established or...

Previous research indicates that a lack of financial sophistication might explain the past strong growth in active management. We construct an objective financial literacy score and analyze the relation between financial literacy and mutual fund investment behavior. We show that there is a...

To understand how real investors use their beliefs and preferences in investing decisions, we examine a panel survey of self-directed online investors at a UK bank. The survey asks for return expectations, risk expectations, and risk tolerance of these investors in three-month intervals between...

We perform a large-scale empirical analysis of pairs trading, a popular relative-value arbitrage approach. We start with a cross-country study of 34 international stock markets and uncover that abnormal returns are a persistent phenomenon. We then construct a comprehensive U.S. data set to...