We examine in an experiment the causes, consequences and possible cures ofmyopic loss aversion (MLA) for investment behaviour under risk. We find thatboth, investment horizons and feedback frequency contribute almost equally tothe effects of MLA. Longer investment horizons and less frequent...

The paper explores the applicability of the satisficing approach. Inparticular, we investigate whether basic principles of aspiration formationand satisficing behavior are transferable between similar situations.Individuals are sequentially confronted with two risky investmenttasks, a simple and...

This paper investigates factors influencing individual portfolio allocations withparticular focus on the role of illusion of control. By forming their portfolio of tworisky lotteries and one risk-less alternative, subjects are requested to reach a targetinvestment profit, whereby equal...

An empirically well-established finding is that equity portfolios are concentratedin the domestic equity market of the investor. Previous theoreticaland empirical analyses have mainly focused on institutional explanations andlargely neglected individual behavior. In this study we report the...

This paper focuses on egocentric biases in financial decisions. Subjects first designa portfolio, whereby each combination of assets yields the same expected returnand variance of returns. They are then confronted with two alternative portfolios;the average portfolio and the portfolio of one’s...

Empirical evidences show that investors tend to be biased toward investing indomestic (home bias) and local (local bias) stocks. Familiarity is considered to be one of thereasons. A similar concept was proposed by Goldstein and Gigerenzer (1999, 2002), known asthe recognition heuristic: “when...

How do people make investment decisions when they receive outcome feedback? We examinedhow well the standard mean-variance model and two reinforcement models predict people’sportfolio decisions. The basic reinforcement model predicts a learning process that relies solelyon the portfolio’s...

In the experimental scenario several agents repeatedly invest in n (n _ 2)state-specic assets. The evolutionarily stable and equilibrium (Blume andEasley, 1992) portfolio for this situation requires to distribute funds accordingto the constant probabilities of the various states. The dierent...

In this paper we experimentally test skewness seeking at the individuallevel. Several prospects that can be ordered with respect to the third-degreestochastic dominance (3SD) criterion are ranked by the participants of theexperiment. We find that the skewness of a distribution has a...

The satisficing approach with its three constituent processes, aspiration formation,satisficing, and aspiration adjustment, is formally elaborated for a specificclass of portfolio selection tasks. It is partly poorly confirmed by experimentaldata, indicating that bounded rationality requires...