We study the influence of systematic probability misestimation on complex financial investment decisions on the context of structured financial products. Structured products have in recent years become more and more complex. We study the question whether this complexity might be a sophisticated...

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...

This paper uses a unique experiment conducted as part of the Investment Survey of the European Investment Bank (EIB) to provide novel evidence on firms' preferences over loan characteristics and the relation between terms of credit and investment decisions. The design of the experiment allows...

This paper focuses on egocentric biases in financial decisions. Subjects first design a portfolio, whereby each combination of assets yields the same expected return and variance of returns. (...)

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...

Story-telling helps to define the human experience. Do people also use narratives to make sense of, and to act on, financial information? Three studies demonstrate that people's investment predictions and choices instead are by narrative thinking. Whereas neoclassical financial theory maintains...

Investors' belief updating differs for investments in a gain position versus those in a loss position and by the favorability of the news, leading to a anomalies in investment decisions. We propose a context-sensitive reinforcement learning model unifying these empirical findings. In a...

The effects of sentiment should be strongest during times of heightened valuation uncertainty. As such, we document a significant amplifying role for market uncertainty in the relation between sentiment and aggregate investment. A one-standard-deviation increase in uncertainty more than doubles...