We develop a structural econometric model to elicit household-specific expectations about future financial asset returns and risk attitudes by using data on observed portfolio holdings and self-assessed willingness to bear financial risk. Our framework assumes that household portfolios are...

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 study the relationship between stock market return expectations and risk aversion of individuals and test whether the joint effects arising from the interaction of these two variables affect investment decisions. Using data from the Dutch National Bank Household Survey, we find that risk...

Purpose - The current study aims to investigate the impacts of two behavioral biases, namely, loss aversion and overconfidence on the performance of US companies. First, the impact of loss aversion on the economic performance of companies was assessed. Second, the impact of overconfidence on...

Lotteries are a curious phenomenon in financial markets, as they seem to contradict traditional utility models that predict rational behavior under uncertainty. Despite this, lotteries continue to attract the interest of many investors who knowingly or unknowingly trade their expectations of...

We exploit a natural experiment in which two professionals compete in a one-stage contest without strategic motives and where one contestant has a clear exogenous psychological momentum advantage over the other in order to estimate the causal effect of psychological momentum on performance. We...

This paper introduces a model-free decomposition of S&P 500 forward market index returns in terms of realized and implied dispersion, downside, and tail risk using option portfolios. The decomposition lends itself by construction to learn about the different sources of risk in the market return,...

In this paper we consider a loss averse investor equipped with a specific, but still quite general, utility function motivated by behavioral finance. We show that under some concrete assumptions about the form of this utility one can derive closed-form solutions for the investor's portfolio...