Revealed Preferences and Risk Aversion in Financial Markets - New Empirical Evidence from a Maximum Likelihood Approach

Project Start:01/2013
Researchers:Andreas Hackethal, Sven-Thorsten Jakusch
Category: Household Finance
Funded by:LOEWE

The authors use maximum likelihood estimation to elicit the form of the utility function as well as its parameters from the trading records of individual investors. The results are merged with administrative data on demographics and answers to an investor questionnaire. Main findings: the majority of investors follow trading patters in accordance with Prospect Theory and observable sociodemographic characteristics such as gender or age do not correlate with specific preference types.

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