Taring all investors with the same brush? Evidence for heterogeneity in individual preferences from a maximum likelihood approach

Microeconomic modeling of investors behavior in financial markets and its results crucially depends on assumptions about the mathematical shape of the underlying preference functions as well as their parameterizations. W
Microeconomic modeling of investors behavior in financial markets and its results crucially depends on assumptions about the mathematical shape of the underlying preference functions as well as their parameterizations. With the purpose to shed some light on the question, which preferences towards risky financial outcomes prevail in stock markets, we adopted and applied a maximum likelihood approach from the field of experimental economics on a randomly selected dataset of 656 private investors of a large German discount brokerage firm. According to our analysis we find evidence that the majority of these clients follow trading pattern in accordance with Prospect Theory (Kahneman and Tversky (1979)). We also find that observable sociodemographic and personal characteristics such as gender or age don't seem to correlate with specific preference types. With respect to the overall impact of preferences on trading behavior, we find a moderate impact of preferences on trading decisions of individual investors. A classification of investors according to various utility types reveals that the strength of the impact of preferences on an investors' rading behavior is not connected to most personal characteristics, but seems to be related to round-trip length.
…show moreshow less

Download full text files

Export metadata

  • Export Bibtex
  • Export RIS

Additional Services

    Share in Twitter Search Google Scholar
Metadaten
Author:Andreas Hackethal, Sven Thorsten Jakusch, Steffen Meyer
URN:urn:nbn:de:hebis:30:3-416995
URL:https://ssrn.com/abstract=2845866
Parent Title (English):SAFE working paper series ; No. 147
Series (Serial Number):SAFE working paper series (147)
Publisher:SAFE
Place of publication:Frankfurt am Main
Document Type:Working Paper
Language:English
Year of Completion:2016
Year of first Publication:2016
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2016/10/20
Tag:Individual Investors; Maximum Likelihood; Utility Theory
Pagenumber:61
HeBIS PPN:390298409
Institutes:Wirtschaftswissenschaften
House of Finance (HoF)
Center for Financial Studies (CFS)
Sustainable Architecture for Finance in Europe (SAFE)
Dewey Decimal Classification:330 Wirtschaft
JEL-Classification:C35 Discrete Regression and Qualitative Choice Models; Discrete Regressors (Updated!)
C51 Model Construction and Estimation
C52 Model Evaluation and Selection
G11 Portfolio Choice; Investment Decisions
G02
Sammlungen:Universitätspublikationen
Licence (German):License LogoDeutsches Urheberrecht

$Rev: 11761 $