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The Standard Portfolio Choice Problem in Germany*

Breunig, C; Huck, S; Schmidt, T; Weizsäcker, G; (2021) The Standard Portfolio Choice Problem in Germany*. The Economic Journal , 131 (638) pp. 2413-2446. 10.1093/ej/ueab006.

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Abstract

We study an investment experiment with a representative sample of German households. Respondents invest in a safe asset and a risky asset whose return is tied to the German stock market. Experimental investments correlate with beliefs about stock market returns and exhibit desirable external validity at least in one respect: they predict real-life stock market participation. But many households are unresponsive to an exogenous increase in the risky asset’s return. The data analysis and a series of additional laboratory experiments suggest that task complexity decreases the responsiveness to incentives. Modifying the safe asset’s return has a larger effect on behaviour than modifying the risky asset’s return.

Type: Article
Title: The Standard Portfolio Choice Problem in Germany*
DOI: 10.1093/ej/ueab006
Publisher version: https://doi.org/10.1093/ej/ueab006
Language: English
Additional information: This version is the author accepted manuscript. For information on re-use, please refer to the publisher’s terms and conditions.
Keywords: Stock market expectations, stock market participation, portfolio choice, financial literacy, complexity
UCL classification: UCL
UCL > Provost and Vice Provost Offices > UCL SLASH
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics
URI: https://discovery.ucl.ac.uk/id/eprint/10125350
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