This paper shows that the framework proposed by Barberis and Huang (2009) to incorporate narrow framing and loss aversion into dynamic models of portfolio choice and asset pricing can be extended to also account for probability weighting and for a value function that is convex on losses and...

We study an investment experiment conducted with a representative sample of German households. Respondents invest in a safe asset and a risky asset whose return is tied to the German stock market. Experimental investments correlate with beliefs about stock market returns and exhibit desirable...

Households hold undiversified stock portfolios of firms headquartered near their city of residence. Leading explanations assign a causal role for proximity. The literature neglects that distance is endogenous. Households may locate based on unobservables such as optimism about a city's economic...

We analyze household stock market participation and allocation in a survey covering 19 European countries. We jointly control for all relevant variables from prior studies, which typically focus on one at a time, and omit risk-aversion. Excellent full model predictive power decomposes into...

We investigate two alternative explanations why men may hold more stocks than women. Apart from a gender difference in risk aversion, gender differences in either optimism or in perceived risk of financial markets might cause men to hold more risky assets. Our results show that men tend to be...

Assessing the importance of uninsurable wage risk for individual financial choices faces two challenges. First, the identification of the marginal effect requires a measure of at least one component of risk that cannot be diversified or avoided. Moreover, measures of uninsurable wage risk must...

We study an investment experiment with a representative sample of German households. Respondents invest in a safe asset and a risky asset whose return is tied to the German stock market. Experimental investments correlate with beliefs about stock market returns and exhibit desirable external...

Ratios that indicate the statistical significance of a fund’s alpha typically appraise its performance. A growing literature suggests that even in the absence of any ability to predict returns, holding options positions on the benchmark assets or trading frequently can significantly enhance...

Die Stabilität der Europäischen Währungsunion ist durch die derzeit angespannte Haushaltslage und den hohen Verschuldungsgrad einiger Mitgliedstaaten in Frage gestellt. Diese Arbeit untersucht die Auswirkungen verschiedener (Krisen-)Szenarien auf das Portfolio eines durchschnittlichen...

Transaction-cost models in continuous-time markets are considered. Given that investors decide to buy or sell at certain time instants, we study the existence of trading strategies that reach a certain final wealth level in continuous-time markets, under the assumption that transaction costs,...