This paper reports the results of experiments on portfolio choice in the presence of nontradeable income. The nontradeable income part could either be riskless or risky (background risk). In many cases, we observe behavior which is qualitatively consistent with the predictions of normative...

The question how an allocation decision is influenced by the investment horizon is of highest practical relevance, in particular in the context of retirement savings. Practitioners refer to the law of large numbers to argue that for a sufficiently long investment horizon it is almost certain to...

This paper presents the results of an asset allocation experiment on the influence of the investment horizon on risk taking. We investigate exposures to the risky asset for an investment horizon of one and two periods in a dynamic setting. We found no significant difference in allocations.

This paper considers the equity risk premium in the German capital market. First of all, we discuss empirical problems associated with the computation of the equity risk premium. Particularities of the German capital market receive special attention. Next, we compute the predicted risk premium...

In this study, we analyze whether volatility forecasts (judgmental confidence intervals) are influenced by the specific elicitation mode (i.e. whether forecasters have to state future price levels or directly future returns as upper and lower bounds). We present questionnaire responses of about...

The disposition effect describes investors’ common tendency of quitting a winning investment too soon and holding on to losing investments too long (Shefrin and Statman 1985). Our paper analyses individual level disposition effects using both account level field data as well as a controlled...

This paper describes a study, in which we examine the diversification behavior of financial advisors. The Asset Allocation Puzzle describes the phenomenon that popular financial advice tends to be inconsistent with the mutual-fund separation theorem. While Canner, Mankiw and Weil (1997) try to...

Anecdotal evidence and recent theoretical models argue that past stock returns affect subsequent stock trading volume. We study 3,000 individual investors over a 51 month period to test this prediction using linear panel regressions as well as negative binomial panel regressions and Logit panel...

For a longer investment period investment consultants use to recommend a larger proportion of risky assets in investors' portfolios. In an experiment we examine the effect of different investment horizons on investors' risk behavior. We are interested both in the participants' risk perception...