We study the effect of variation in correlation on investment decision in an experimental two asset application. Comparison of allocations across problems suggests that subjects neglect probabilistic information on the joint distribution of returns and base their allocations on the observed...

The experimental approach is applied to explore the value of unidentified historical information in stock-return prediction. Return sequences were randomly drawn cross section and time from historical S&P500 data. Subjects were requested to predict returns or select stocks from 12 preceding...