The Performance of Groups and Individuals in Financial Decision-Making

On financial markets many investment decisions are taken by groups and not by individuals. The evidence, however, whether groups better than individuals, is ambigous. We analyze the portfolios of groups and individuals in an asset allocation task on an experimental market. We find that groups on average outperform individuals, i.e., achieve higher Sharpe ratios but the difference is not significant. However, there are also large performance discrepancies across groups and the best groups significantly outperform individuals. An important determinant of the success a group in our experiment is the degree of information exchange between group members as a higher level is linked to a significantly better performance.<BR>