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We report a portfolio-choice experiment that enables us to estimate parametric models of ambiguity aversion at the …
Persistent link: https://www.econbiz.de/10011757224
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...
Persistent link: https://www.econbiz.de/10011408444
We report on a laboratory experiment testing for the presence of loss aversion, as separate from risk aversion …
Persistent link: https://www.econbiz.de/10011997618
We define two new stochastic orders combining probability ratio and likelihood ratio and specify two respective classes of payoff functions, which nest most models in the literature as special cases, such that a risk change satisfies one of the two stochastic orders if and only if given any...
Persistent link: https://www.econbiz.de/10013295041
Loss aversion has been shown to be an important driver of people’s investment decisions. Encouraged by regulators, financial institutions are in search of ways to incorporate clients’ loss aversion in their risk classifications. The most critical obstacle appears to be the lack of a valid...
Persistent link: https://www.econbiz.de/10013492094
Myopic loss aversion (MLA) has been proposed as an explanation for the equity premium puzzle, and a number of experiments on students indicate that people do exhibit MLA. However, many people do not rely on their own judgment when making investment decisions, but obtain help from financial...
Persistent link: https://www.econbiz.de/10013142056
new tests of prospect theory. We implemented our method in an experiment and obtained support for prospect theory. Utility …
Persistent link: https://www.econbiz.de/10013007231
We investigate whether alternative asset classes should be included in optimal portfolios of the most prominent investor personae in the Behavioral Finance literature, namely, the Cumulative Prospect Theory, the Markowitz and the Loss Averse types of investors. We develop a stochastic spanning...
Persistent link: https://www.econbiz.de/10014246136
principles of Expected Utility Theory (EUT) and of Portfolio Selection Theory (PST). The experiment is performed with individuals … providing additional risk that is not compensated by additional expected value. We find that the results of our experiment are …
Persistent link: https://www.econbiz.de/10014182702
A risky choice experiment is based on one-dimensional choice variables and risk neutrality induced via binary lottery … incentives. Each participant confronts many parameter constellations with varying optimal payoffs. We assess (sub)optimality, as …
Persistent link: https://www.econbiz.de/10012981935