Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/56867
Authors: 
Diao, Linan
Rieskamp, Jörg
Year of Publication: 
2011
Series/Report no.: 
Jena economic research papers 2011,009
Abstract: 
How do people make investment decisions when they receive outcome feedback? We examined how well the standard mean-variance model and two reinforcement models predict people's portfolio decisions. The basic reinforcement model predicts a learning process that relies solely on the portfolio's overall return, whereas the proposed extended reinforcement model also takes the risk and covariance of the investments into account. The experimental results illustrate that people reacted sensitively to different correlation structures of the investment alternatives, which was best predicted by the extended reinforcement model. The results illustrate that simple reinforcement learning is sufficient to detect correlation between investments.
Subjects: 
repeated portfolio decisions
reinforcement learning model
correlation
JEL: 
C91
D83
G11
Document Type: 
Working Paper

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