Presented is the formulation for determining the exact, expected growth-optimal fraction of equity to risk for all conditions, rather than merely the asymptotic growth-optimal fraction. The formulation presented represents the surface in the leverage space manifold, wherein the loci at the peak...

We present an experiment that investigates the effect of the fee structure and past returns on mutual fund choice. We find that subjects pay too little attention to the (periodic and small) operation expenses fee, but the more salient front-end load is used as a commitment device and leads to...

We experimentally study how presentation formats for return distributions affect investors' diversification choices. We find that sampling returns alleviates correlation neglect and constitutes an effective way to improve financial decisions. When participants get a description of probabilities...

Do women and men behave differently in financial asset markets? Our results from an asset market experiment using the Smith, Suchaneck, and Williams (1988) framework show marked gender difference in producing speculative price bubbles. Using 35 markets from different studies, a meta-analysis...

Neoclassical finance assumes that investors are Bayesian. In many realistic situations, Bayesian learning is challenging. Here, we consider investment opportunities that change randomly, while payoffs are observable only when invested. In a stylized version of the task, we wondered whether...

Does frequent outperformance cause investors to buy? If so, do investors have a preference to outperform most of the time, or does frequent outperformance bias beliefs about the risk and return of an asset? In several randomized experiments, we show that retail investors purchase frequently...

We introduce the Qualitative Expectations Hypothesis (QEH) as a new approach to modeling macroeconomic and Financial outcomes. Building on John Muth's seminal insight underpinning the Rational Expectations Hypothesis (REH), QEH represents the market's forecasts to be consistent with the...

We introduce the Qualitative Expectations Hypothesis (QEH) as a new approach to modeling macroeconomic and Financial outcomes. Building on John Muth's seminal insight underpinning the Rational Expectations Hypothesis (REH), QEH represents the market's forecasts to be consistent with the...

We introduce the Qualitative Expectations Hypothesis (QEH) as a new approach to modeling macroeconomic and financial outcomes. Building on John Muth's seminal insight underpinning the Rational Expectations Hypothesis (REH), QEH represents the market's forecasts to be consistent with the...

This is the first of a “Gambling for Quants” series that discusses the science of gambling for quantitatively trained market practitioners. Part 1 describes the well-known Kelly Criterion fractional betting system for simple coin flips. Most of the important ideas are understandable in this...