publication . Research . Article . 2011

Opening the Black Box: From an Individual Bias to Portfolio Performance

Alen Nosic; Martin Weber; Markus Glaser;
Open Access German
  • Published: 01 Jan 2011
  • Country: Germany
We suggest an experimental design that can help opening the black box of investor behavior by documenting a channel of how biases affect portfolio performance. We study two of the most important investor biases (overreaction and overconfidence), show how they are related, and analyze their consequences for portfolio choice and resulting portfolio performance in a controlled experimental setting with 104 participants. The main innovation of our study is that we go beyond just documenting a correlation between overconfidence on the one hand and investor behavior as well as resulting portfolio performance on the other hand. We empirically identify the precise chann...
free text keywords: 330 Wirtschaft, Econometrics, Portfolio, Overconfidence effect, Actuarial science, Pessimism, media_common.quotation_subject, media_common, Black box, Post-modern portfolio theory, Sharpe ratio, Business, Risk taking, Portfolio optimization
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