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https://hdl.handle.net/10419/52523
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DC Field | Value | Language |
---|---|---|
dc.contributor.author | Eyster, Erik | en |
dc.contributor.author | Weizsäcker, Georg | en |
dc.date.accessioned | 2011-10-07 | - |
dc.date.accessioned | 2011-12-06T12:51:12Z | - |
dc.date.available | 2011-12-06T12:51:12Z | - |
dc.date.issued | 2011 | - |
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 |
dc.language.iso | eng | en |
dc.publisher | |aDeutsches Institut für Wirtschaftsforschung (DIW) |cBerlin | en |
dc.relation.ispartofseries | |aDIW Discussion Papers |x1104 | en |
dc.subject.jel | B49 | en |
dc.subject.ddc | 330 | en |
dc.subject.keyword | portfolio choice | en |
dc.subject.keyword | correlation neglect | en |
dc.subject.keyword | 1/N heuristic | en |
dc.subject.keyword | biases in beliefs | en |
dc.title | Correlation neglect in financial decision-making | - |
dc.type | Working Paper | en |
dc.identifier.ppn | 66946063X | en |
dc.rights | http://www.econstor.eu/dspace/Nutzungsbedingungen | en |
dc.identifier.repec | RePEc:diw:diwwpp:dp1104 | en |
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