Investment decisions and time horizon: Risk perception and risk behavior in repeated gambles


Klos, Alexander ; Weber, Elke U. ; Weber, Martin


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URL: http://ub-madoc.bib.uni-mannheim.de/906
URN: urn:nbn:de:bsz:180-madoc-9061
Document Type: Report
Year of publication: 2005
Publication language: English
Institution: Business School > Sonstige - Fakultät für Betriebswirtschaftslehre
MADOC publication series: Lehrstuhl für ABWL, Finanzwirtschaft, insb. Bankbetriebslehre (Weber) > Working Papers
Subject: 330 Economics
Subject headings (SWD): Investition , Investitionsverhalten , Risikoverteilung
Abstract: To investigate the effect of time horizon on investment behavior, this paper reports the results of an experiment in which business graduate students provided certainty equivalents and judged various dimensions of the outcome distribution of simple gambles that were played either once or repeatedly for 5 or 50 times. Systematic mistakes in the ex-ante estimations of the distributions of outcomes after (independent) repeated plays were observed. Despite correctly realizing that outcome standard deviation increases with the number of plays, respondents showed evidence of Samuelson's (1963) fallacy of large numbers. Perceived risk judgments showed only low correlations with standard deviation estimates, but were instead related to the anticipated probability of a loss (which was overestimated), mean excess loss, and the coe±cient of variation. Implications for future research and practical implications for financial advisors are discussed.
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Das Dokument wird vom Publikationsserver der Universitätsbibliothek Mannheim bereitgestellt.




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Klos, Alexander ; Weber, Elke U. ; Weber, Martin (2005) Investment decisions and time horizon: Risk perception and risk behavior in repeated gambles. Open Access [Report]
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