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Please use this identifier to cite or link to this item:
http://hdl.handle.net/10419/52523
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Full metadata record
| DC Field | | Value | | Language |
| dc.contributor.author | | Eyster, Erik | | en_US |
| dc.contributor.author | | Weizsäcker, Georg | | en_US |
| dc.date.accessioned | | 2011-10-07 | | en_US |
| dc.date.accessioned | | 2011-12-06T12:51:12Z | | - |
| dc.date.available | | 2011-12-06T12:51:12Z | | - |
| dc.date.issued | | 2011 | | en_US |
| dc.identifier.uri | | http://hdl.handle.net/10419/52523 | | - |
| dc.description.abstract | | Good decision-making often requires people to perceive and handle a myriad of statistical correlations. Notably, optimal portfolio theory depends upon a sophisticated understanding of the correlation among financial assets. In this paper, we examine people's understanding of correlation using a sequence of portfolio-allocation problems and find it to be strongly imperfect. Our experiment uses pairs of portfolio-choice problems that have the same asset span - identical sets of attainable returns - and differ only in the assets' correlation. While any outcome-based theory of choice makes the same prediction across paired problems, subjects behave very differently across pairs. We find evidence for correlation neglect - treating correlated variables as uncorrelated - as well as for a form of 1/N heuristic - investing half of wealth each of the two available assets. | | en_US |
| dc.language.iso | | eng | | en_US |
| dc.publisher | | Deutsches Institut für Wirtschaftsforschung (DIW) Berlin | | en_US |
| dc.relation.ispartofseries | | Discussion papers // German Institute for Economic Research 1104 | | en_US |
| dc.subject.jel | | B49 | | en_US |
| dc.subject.ddc | | 330 | | en_US |
| dc.subject.keyword | | portfolio choice | | en_US |
| dc.subject.keyword | | correlation neglect | | en_US |
| dc.subject.keyword | | 1/N heuristic | | en_US |
| dc.subject.keyword | | biases in beliefs | | en_US |
| dc.title | | Correlation neglect in financial decision-making | | en_US |
| dc.type | | Working Paper | | en_US |
| dc.identifier.ppn | | 66946063X | | en_US |
| dc.rights | | http://www.econstor.eu/dspace/Nutzungsbedingungen | | en_US |
| Appears in Collections: | | Publikationen von Forscherinnen und Forschern des DIW DIW-Diskussionspapiere
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