The Standard Portfolio Choice Problem in Germany

54 Pages Posted: 31 Jul 2015

See all articles by Steffen Huck

Steffen Huck

Wissenschaftszentrum Berlin für Sozialforschung (WZB)

Tobias Schmidt

German Institute for Economic Research (DIW Berlin)

Georg Weizsacker

Humboldt University Berlin; DIW Berlin

Multiple version iconThere are 2 versions of this paper

Date Written: July 30, 2015

Abstract

We study an investment experiment conducted 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: they predict real-life stock market participation. But many households do not significantly react 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 than modifying the risky asset’s return.

Keywords: stock market expectations, stock market participation, portfolio choice, artefactual field experiment, financial literacy, complexity

JEL Classification: D100, D140, D840, G110

Suggested Citation

Huck, Steffen and Schmidt, Tobias and Weizsacker, Georg, The Standard Portfolio Choice Problem in Germany (July 30, 2015). CESifo Working Paper Series No. 5441. Available at SSRN: https://ssrn.com/abstract=2637834

Steffen Huck

Wissenschaftszentrum Berlin für Sozialforschung (WZB) ( email )

Reichpietschufer 50
D-10785 Berlin, 10785
Germany

Tobias Schmidt

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

Georg Weizsacker (Contact Author)

Humboldt University Berlin ( email )

Spandauer Str. 1
Berlin, D-10099
Germany

DIW Berlin

Mohrenstr. 58
Berlin
Germany

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