A5062846155- Financial Markets and Investment Strategies
- Decision-Making and Behavioral Economics
- Auditing, Earnings Management, Governance
- Experimental Behavioral Economics Studies
- Stochastic processes and financial applications
- Housing Market and Economics
- Risk and Portfolio Optimization
- Culture, Economy, and Development Studies
University of Zurich
2015-2023
Institute of Finance and Banking
2015-2023
We demonstrate that investor satisfaction and investment behavior are influenced substantially by the price path which final return is achieved. In a series of experiments, we analyze various different paths. Investors most satisfied if their assets first fall in value then recover, they least with opposite pattern, independent whether positive or negative. Price paths systematically influence risk preferences, beliefs, ultimately trading decisions. Our results enable much more holistic...
Investor beliefs about the future dynamics of a financial market are key determinant prices. Yet, these cannot easily be identified from prices as they altered by stochastic discounting. Under conditions described Ross (2015), and discount factor can jointly uniquely disentangled derivatives. The approach has been widely criticized for its poor performance on empirical prediction tasks. In this paper, I show how to impose ordinal constraints mitigate method's fragility. Using simulations,...
This paper analyzes how consistently investors use their beliefs in trading decisions. In a tailored economic experiment that allows to assess contemporaneous forecasts and trades, we find decisions sell are considerably less belief-driven than buy. difference stems entirely from selling the presence of losses where belief-sensitivity reduces substantially. The observed asymmetry is independent frequently shift preferences for losses. Reduced belief sensitivity affects performance. On...