We study a number of large international military conflicts since World War II where we establish a news analysis as a proxy for the estimated likelihood that the conflict will result in a war. We find that in cases when there is a pre-war phase, an increase in the war likelihood tends to...

In many countries structured investment products are popular among retail investors. We explain the demand for these products using unique field data where we let subjects freely design their "favorite" structured product. Results suggest that the supply with capital protected products...

We prove a formula for the computation of optimal financial investments in an expected utility framework with arbitrary (not necessarily concave) utility functions. This extends classical results on optimal financial investments for strictly concave utility functions and is of importance...

We analyze a large data set of private banking portfolios in Switzerland of a major bank with the unique feature that parts of the portfolios were managed by the bank, parts were advisory portfolios. To correct the heterogeneity of individual investors, we apply a mixture model and a cluster...

The new regulation of the EU for financial products (UCITS IV) prescribes Value at Risk (VaR) as the benchmark for assessing the risk of structured products. We discuss the limitations of this approach and show that, in theory, the expected return of the structured product is unbounded while the...

We study a model that relates dividend payout policy to behavioral issues based on the ideas of mental accounting. A panel analysis across 29 countries and over 43,000 firm-years demonstrates that our model studying the relation between dividends and patience, loss aversion, and ambiguity...

We prove that under very weak conditions optimal financial products have to be co-monotone with the inverted state price density. Optimality is meant in the sense of the maximization of an arbitrary preference model, e.g. Expected Utility Theory or Prospect Theory. The proof is based on methods...

We extend the original form of Prospect Theory by Kahneman and Tversky from finite lotteries to arbitrary probability distributions, thus paving the way for applications in economics and finance. Moreover, we suggest a method how to incorporate a crucial step of the quot;editing phasequot; into...

Motivated by Bali, Cakici and Whitelaw (2011)'s findings of the “MAX effect” in the U.S. stock markets, where stocks with high maximum daily returns in the previous month have abnormally low average returns, we check their result's robustness on two different periods, which was not conducted...