IDEAS home Printed from https://ideas.repec.org/p/got/vwldps/140.html
   My bibliography  Save this paper

Portfolio diversification: an experimental study

Author

Listed:
  • Zulia Gubaydullina

    (University of Göttingen)

  • Markus Spiwoks

    (Wolfsburg University of Applied Sciences)

Abstract

The paper analyses on an experimental basis the phenomenon of non-optimal under-diversification in portfolio choice decisions and investigates the reasons behind it. The most important obstacles for optimal diversification are studied – the correlation neglect hypothesis and the overconfidence which both lead to suboptimal diversification decisions. The investment alternatives are constructed in a way that the Markowitz’ efficiency frontier is reduced to a single point in the return-risk diagram so that unambiguous interpretation of the results is possible: the subjects neglect the correlation between the assets, use naïve diversification strategies and take irrelevant information as a foundation for their investment decisions, the first effect being stronger than the second.

Suggested Citation

  • Zulia Gubaydullina & Markus Spiwoks, 2009. "Portfolio diversification: an experimental study," Departmental Discussion Papers 140, University of Goettingen, Department of Economics.
    • Handle: RePEc:got:vwldps:140
    as

    Download full text from publisher

    File URL: http://www2.vwl.wiso.uni-goettingen.de/departmentpaper/No_140.pdf
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Castro, Luciano de & Galvao, Antonio F. & Kim, Jeong Yeol & Montes-Rojas, Gabriel & Olmo, Jose, 2022. "Experiments on portfolio selection: A comparison between quantile preferences and expected utility decision models," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 97(C).
    2. Michael Ungeheuer & Martin Weber, 2021. "The Perception of Dependence, Investment Decisions, and Stock Prices," Journal of Finance, American Finance Association, vol. 76(2), pages 797-844, April.
    3. Zhou, Zhongbao & Jin, Qianying & Xiao, Helu & Wu, Qian & Liu, Wenbin, 2018. "Estimation of cardinality constrained portfolio efficiency via segmented DEA," Omega, Elsevier, vol. 76(C), pages 28-37.
    4. Weber, Martin & Ungeheuer, Michael, 2016. "The Perception of Dependence and Investment Decisions," CEPR Discussion Papers 11188, C.E.P.R. Discussion Papers.

    More about this item

    Keywords

    experimental economics; portfolio choice; investment decisions; correlation neglect; overconfidence;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:got:vwldps:140. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ben Schroeter (email available below). General contact details of provider: https://edirc.repec.org/data/vsgoede.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.