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A behavioral portfolio analysis of retirement portfolios

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  • Singer, Nico

Abstract

To most individuals saving for retirement is the number one financial goal. However, it reveals a complex task and induces serious behavioral problems which cannot be explained by traditional economic theory. This paper investigates the role of behavioral asset selection on retirement portfolios in Germany. Simulated behavioral portfolios show (i) an impact of emotions since pessimism (optimism) induces the most conservative (aggressive) portfolio, (ii) concentrated portfolios with a large position in only one secure asset and a small position in a risky portfolio, and (iii) a large difference to mean-variance portfolios in terms of level of diversification. I conclude that behavioral portfolio theory has remarkably power in understanding, describing and selecting retirement portfolios in Germany. The results have several implication for financial planning, e.g. for an auto-pilot solution to encourage people to more retirement saving.

Suggested Citation

  • Singer, Nico, 2011. "A behavioral portfolio analysis of retirement portfolios," Thuenen-Series of Applied Economic Theory 104, University of Rostock, Institute of Economics.
    • Handle: RePEc:zbw:roswps:104
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    Cited by:

    1. Kuo-Hwa Chang & Michael Nayat Young, 2019. "Portfolios Optimizations of Behavioral Stocks with Perception Probability Weightings," Annals of Economics and Finance, Society for AEF, vol. 20(2), pages 817-845, November.

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    More about this item

    Keywords

    behavioral portfolio choice; decision making under risk; retirement portfolios;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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