Abstract

http://ssrn.com/abstract=1942440
 
 

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Volatility Inadaptability: Investors Care About Risk, But Can't Cope with Volatility


Christian Ehm


University of Mannheim - Department of Banking and Finance

Christine Kaufmann


University of Mannheim - Department of Banking and Finance

Martin Weber


University of Mannheim - Department of Banking and Finance

June 9, 2013

Review of Finance (Forthcoming)

Abstract:     
This paper investigates two research questions: Do investors see a relationship between risk attitude and the amount invested risky? Further, do investors adjust their investments if provided with assets with different volatilities? In an experimental study, investors allocate an amount between a risky and a risk-free asset. Investors' risk attitude predicts risk taking. Investors are, however, unable to adapt to risky assets with different volatilities; they choose almost the same allocation to the risky asset independently of its volatility, thus amassing significantly different portfolios.

Number of Pages in PDF File: 50

Keywords: portfolio choice, portfolio selection, risk-taking, volatility, volatility inadaptability

JEL Classification: G11

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Date posted: October 13, 2011 ; Last revised: June 12, 2013

Suggested Citation

Ehm, Christian and Kaufmann, Christine and Weber, Martin, Volatility Inadaptability: Investors Care About Risk, But Can't Cope with Volatility (June 9, 2013). Review of Finance (Forthcoming). Available at SSRN: http://ssrn.com/abstract=1942440 or http://dx.doi.org/10.2139/ssrn.1942440

Contact Information

Christian Ehm (Contact Author)
University of Mannheim - Department of Banking and Finance ( email )
L5, 2
Mannheim, 68131
Germany
Christine Kaufmann
University of Mannheim - Department of Banking and Finance ( email )
L5, 2
Mannheim, 68131
Germany
Martin Weber
University of Mannheim - Department of Banking and Finance ( email )
D-68131 Mannheim
Germany
+49 621 181 1532 (Phone)
+49 621 181 1534 (Fax)
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