The effect of envy and altruism on investment choices is analyzed by employing utility-free bivariate First-degree Stochastic Dominance (FSD) rule. Using the classic expected utility as the benchmark we find that envy or altruism may induce univariate FSD violation, hence a violation of the...

Soccer games create sentiment, which affects stock prices. The World Cups before 2010 created exploitable abnormal profit in the U.S. stock market. The effect was not exploited, presumably because it was unknown before the 2010 games. However, just before the 2010 World Cup, the exploitable...

Do happy people predict future risk and return differently from unhappy people, or do individuals rely only on economic facts? We survey investors on their subjective sentiment-creating factors, return and risk expectations, and investment plans. We find that non-economic factors systematically...

Mean-Variance is the most popular investment rule employed by both practitioners and researches. For a short-planned investment horizon, this rule generally conforms with expected utility paradigm. However, for a relatively long horizon, generally more than one year, the distributions of returns...

The increase in life expectancy spells disaster at retirement. One can solve this problem by investing in the maximum geometric mean (MGM) portfolio, which is empirically composed from equity. For a T = 30 year horizon or more, the MGM portfolio dominates other investment strategies by almost...

The home bias is typically explained by various extra costs for foreign investments, such as higher transaction costs and information asymmetries. These costs have dramatically decreased over the last 15 years: the internet has revolutionized the global flow of information, accounting reports...

The main problem of portfolio optimization is parameter estimation error. Various methods have been suggested to mitigate this problem, among which are shrinkage, resampling, Bayesian updating, naïve diversification, and imposing constraints on the portfolio weights. This study suggests two...

Prospect Theory (PT), which relies on subjects' behavior as observed in laboratory experiments, contradicts the behavior predicted by the Expected Utility (EU) paradigm. Having wealth of $100,000 or having wealth of $90,000 and wining $10,000 in a lottery is the same by EU paradigm but not the...

This paper provides new evidence on the time-series predictability of stock market returns by introducing a test of nonlinear mean reversion. The performance of extreme daily returns is evaluated in terms of their power to predict short- and long-horizon returns on various stock market indices...

The current study shows that real estate prices in several countries reveal a significant and persistent seasonality, where the highest rates of return are obtained in the spring and early summer, and the lowest rates of return are obtained in the fall. This seasonality is explained by a joint...