The need to understand and leverage consumer-brand bonds has become critical in a marketplace characterized by increasing unpredictability, diminishing product differentiation, and heightened competitive pressure. This is especially true for fast moving consumer goods (FMCG) manufacturers and...

We analyze the effect of geographic proximity on individual investors’ portfolio choice. Using a unique data set which covers the common stockholdings of private households at regional banks in Germany, we document strong and consistent overinvestment in geographically close companies. Our...

Extant literature consistently documents that investors tilt their domestic equity portfolios towards regionally close stocks (local bias). We hypothesize that individual investors’ local bias is not limited to the domestic sphere but instead also determines their international investment...

This paper explores the relationship between risk attitude and asset diversification in household portfolios. We first examine the impact of manifested risk aversion on the total number of distinct assets held in a portfolio (naive diversification). The second part of the paper focuses on a more...

This paper explores the relationship between the self-declared risk aversion of private investors and their propensity to hold incomplete portfolios of financial assets. The analysis is based on household survey data from the German Socioeconomic Panel (SOEP) that provides a reliable measure of...

This paper explores the relationship between self-declared risk aversion of private investors and their willingness to hold diversified portfolios of financial assets. The analysis is based on household survey data from the German Socioeconomic Panel (SOEP) that provides a reliable measure of...

We experimentally test overconfidence in investment decisions by offering participants the possibility to substitute their own for alternative investment choices. Overall, 149 subjects participated in two experiments, one with just one risky asset, the other with two risky assets. Overconfidence...

The empirical finding that entrepreneurs tend to invest a large share of their wealth in their own firms despite comparably low returns and high risk has become known as the private equity premium puzzle. This paper provides evidence supporting the hypothesis that lower risk aversion of...

Individual preferences with respect to risk taking play an important role in financial economic behaviour and, hence, in financial markets. Using German microdata, we argue that individual religiosity is a determinant of household willingness to take risks, since it shapes relevant individual...

We show analytically under quite general conditions that implied rates of return based on analysts' earnings forecasts are only a downward biased estimator for future expected one-period returns and therefore not suited for computing market risk premia. The extent of this bias is substantial as...