This paper describes a study, in which we examine the diversification behavior of financial advisors. The Asset Allocation Puzzle describes the phenomenon that popular financial advice tends to be inconsistent with the mutual-fund separation theorem. While Canner, Mankiw and Weil (1997) try to...

Anecdotal evidence and recent theoretical models argue that past stock returns affect subsequent stock trading volume. We study 3,000 individual investors over a 51 month period to test this prediction using linear panel regressions as well as negative binomial panel regressions and Logit panel...

This paper reports the results of experiments on portfolio choice in the presence of nontradeable income. The nontradeable income part could either be riskless or risky (background risk). In many cases, we observe behavior which is qualitatively consistent with the predictions of normative...

For a longer investment period investment consultants use to recommend a larger proportion of risky assets in investors' portfolios. In an experiment we examine the effect of different investment horizons on investors' risk behavior. We are interested both in the participants' risk perception...

The cost of information is an often ignored factor in economic situations although the information acquisition behavior of the decision makers has a crucial influence on the outcome. In this experiment, we study an information aggregation process in which participants decide in a random...

The feedback frequency and the length of commitment are two important features of investment alternatives in intertemporal decision-making. So far, empirical research has shown that a lower feedback frequency combined with a longer binding period decreases myopia and thereby increases the...

This Paper reports the results of an experimental parameter-free elicitation and decomposition of decision weights under uncertainty. Assuming cumulative prospect theory, utility functions were elicited for gains and losses at an individual level using the trade-off method. Then decision weights...

Theoretical models predict that overconfident investors will trade more than rational investors. We directly test this hypothesis by correlating individual overconfidence scores with several measures of trading volume of individual investors. Approximately 3,000 online broker investors were...

This Paper analyses the response of stock and credit default swap (CDS) markets to rating announcements by the three major rating agencies during 2000-02. Applying event study methodology, we examine whether and how strongly these markets respond to rating announcements in terms of abnormal...