Under-Diversification And The Role Of Best Reply To Pattern
Three experiments are presented that compare alternative explanations to the coexistence of risk aversion and under-diversification in investment decisions. The participants were asked to select one of several assets under two feedback conditions. In each case, one asset was a weighted combination of the other assets, allowing for lower volatility. The frequency of choice of the composite asset was highly sensitive to feedback condition. The composite asset was the least popular asset when the feedback included information concerning forgone payoffs, and increased in frequency when the feedback was limited to the obtained payoff. These results support the assertion that under-diversification can be a product of learning from feedback and in particular best reply to pattern.
|Date of creation:||2007|
|Date of revision:|
|Contact details of provider:|| Postal: P.O.B 653, Beer-Sheva 8410501|
Web page: http://www.bgu.ac.il/econ
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Fellner, Gerline & Theissen, Erik, 2011.
"Short sale constraints, divergence of opinion and asset values: Evidence from the laboratory,"
CFS Working Paper Series
2011/05, Center for Financial Studies (CFS).
- Gerlinde Fellner & Erik Theissen, 2006. "Short Sale Constraints, Divergence of Opinion and Asset Values: Evidence from the Laboratory," Labsi Experimental Economics Laboratory University of Siena 009, University of Siena.
- Fellner, Gerlinde & Theissen, Erik, 2011. "Short sale constraints, divergence of opinion and asset value: Evidence from the laboratory," CFR Working Papers 11-03, University of Cologne, Centre for Financial Research (CFR).
- Horowitz, John K. & McConnell, Kenneth E., 2002. "A Review of WTA/WTP Studies," Journal of Environmental Economics and Management, Elsevier, vol. 44(3), pages 426-447, November.
- John List, 2003.
"Does market experience eliminate market anomalies?,"
Natural Field Experiments
00297, The Field Experiments Website.
- John A. List, 2003. "Does Market Experience Eliminate Market Anomalies?," The Quarterly Journal of Economics, Oxford University Press, vol. 118(1), pages 41-71.
- Lucy F. Ackert & Bryan K. Church & Richard Deaves, 2002. "Bubbles in experimental asset markets: Irrational exuberance no more," FRB Atlanta Working Paper 2002-24, Federal Reserve Bank of Atlanta.
- Raymond S. Hartman & Michael J. Doane & Chi-Keung Woo, 1991. "Consumer Rationality and the Status Quo," The Quarterly Journal of Economics, Oxford University Press, vol. 106(1), pages 141-162.
- Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard H, 1990. "Experimental Tests of the Endowment Effect and the Coase Theorem," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1325-48, December.
- Eisenberger, Roselies & Weber, Martin, 1995. "Willingness-to-Pay and Willingness-to-Accept for Risky and Ambiguous Lotteries," Journal of Risk and Uncertainty, Springer, vol. 10(3), pages 223-33, May.
- Ernan Haruvy & Charles N. Noussair, 2006. "The Effect of Short Selling on Bubbles and Crashes in Experimental Spot Asset Markets," Journal of Finance, American Finance Association, vol. 61(3), pages 1119-1157, 06.
- Shogren, Jason F. & Seung Y. Shin & Dermot J. Hayes & James B. Kliebenstein, 1994.
"Resolving Differences in Willingness to Pay and Willingness to Accept,"
American Economic Review,
American Economic Association, vol. 84(1), pages 255-70, March.
- Shogren, Jason F. & Shin, Seung Youll & Hayes, Dermot J. & Kliebenstein, James, 1994. "Resolving Differences in Willingness to Pay and Willingness to Accept," Staff General Research Papers 701, Iowa State University, Department of Economics.
- Samuelson, William & Zeckhauser, Richard, 1988. "Status Quo Bias in Decision Making," Journal of Risk and Uncertainty, Springer, vol. 1(1), pages 7-59, March.
When requesting a correction, please mention this item's handle: RePEc:bgu:wpaper:0707. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Aamer Abu-Qarn)
If references are entirely missing, you can add them using this form.