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Structured investment products, also known as equity- or index-linked notes, have become immensely popular among retail investors in the last ten years. In this paper, however, we show that for classical rational investors the utility gains from structured products are typically much smaller...
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The chapter critically surveys the behavioral analysis of commercial law. It begins by examining the preliminary question of whether bounded rationality can persist in well-functioning, highly competitive markets. As the theoretical analysis and empirical evidence demonstrate, irrational...
Persistent link: https://www.econbiz.de/10012931640
There are many decisions that Americans have to make about retirement before, at, and after retirement. For example, Americans have to decide when to start saving for retirement, how much to save, how to invest those savings, when to retire, when to claim social security, and how to take...
Persistent link: https://www.econbiz.de/10012935718
The popularity of technical analysis is puzzling. We propose a simple model of how investors evaluate a trading rule, and show that the market timing of technical trading rules induces lottery-like trading profits. Therefore, investors' preference for positive skewness caters to the popularity...
Persistent link: https://www.econbiz.de/10012905136
We study how personal experiences affect individual risk taking. To separate the intertwining effects of personal experiences and wealth changes, our identification strategy relies on the decision to keep or rebalance unexpected inheritances of risky assets. Experience derives from investments...
Persistent link: https://www.econbiz.de/10012856504
We elicit money illusion and match it with financial and sociodemographic data from official registers on a quasi-representative sample of the Danish population. We find that people who are more prone to money illusion hold more of their gross wealth in nominal assets, including bank deposits...
Persistent link: https://www.econbiz.de/10012978288
I solve the life-cycle portfolio allocation problem of a disappointment averse (DA) agent. DA agents overweight disappointing outcomes. Unlike expected utility investors, DA investors drastically cut their allocation to stocks around retirement due to a distinct effect associated with the drop...
Persistent link: https://www.econbiz.de/10013077914
Our experiments evaluate the role of information presentation in reducing violations of the Law of One Price in individual investor selection of index mutual funds. The results indicate that most individuals fail to minimize fees. However, individuals allocate nearly 27% (43%) more of their...
Persistent link: https://www.econbiz.de/10014500726
We evaluate the income elasticity of the aggregate budget share spent on a sub-group of commodities, in a competitive framework, by a continuum of agents having the same income, but heterogeneous behavior described by an "homothetic preferences scaling factor" having a bounded Pareto...
Persistent link: https://www.econbiz.de/10012945782