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...

Using data from surveys as well as as real transactions we analyze which and why investors choose funds with performance fees even though these funds may be more expensive. According to agency theory, performance fees could incentivize managers to achieve better returns, but they could also...

We test the abilities of the Stiftung Warentest fund rating system to predict future fund performance among German registered funds for six equity categories: Germany, Euro-Zone, Europe, North-America, Pacific, and World. Stiftung Warentest is a consumer protection agency and a major provider...

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...