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

Project Start:01/2013
Status:Completed
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.

Related Working Papers

No.Author/sTitleYearProgram AreaKeywords
148Petr Jakubik, Sven-Thorsten JakuschOn the Applicability of Maximum Likelihood Methods: From Experimental to Financial Data2016 Household Finance Utility Functions, Model Selection, Parameter Elicitation
146Andreas Hackethal, Sven-Thorsten Jakusch, Steffen MeyerTaming Models of Prospect Theory in the Wild? Estimation of Vlcek and Hens (2011)2016 Household Finance Prospect Theory, Parameter Elicitation, Investors Heterogeneity
147Andreas Hackethal, Sven-Thorsten Jakusch, Steffen MeyerTaring All Investors with the Same Brush? Evidence for Heterogeneity in Individual Preferences from a Maximum Likelihood Approach2016 Household Finance Utility Theory, Maximum Likelihood, Individual Investors
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