We experimentally study how presentation formats for return distributions affect investors' diversification choices. We find that sampling returns alleviates correlation neglect and constitutes an effective way to improve financial decisions. When participants get a description of probabilities...

How do investors perceive dependence between stock returns? And how does their perception of dependence affect investments and stock prices? We show experimentally that investors understand differences in dependence, but not in terms of correlation. Participants invest as if applying a simple...

Does frequent outperformance cause investors to buy? If so, do investors have a preference to outperform most of the time, or does frequent outperformance bias beliefs about the risk and return of an asset? In several randomized experiments, we show that retail investors purchase frequently...

We propose a framework where perceptions of uncertainty are driven by the interaction between cognitive constraints and the way that people learn about it--whether information is presented sequentially or simultaneously. People can learn about uncertainty by observing the distribution of...