Quotation Fellner, Gerlinde. 2009. Illusion of control as a source of poor diversification - Experimental evidence. Journal of Behavioral Finance 10 (1): 55-67.


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Abstract

This paper investigates factors that influence individual portfolio allocations with particular focus on illusion of control. Participants in the experiment form their portfolio of two risky lotteries and one risk-free alternative with the target to reach a predetermined income. Subjects show illusion of control as they excessively invest in a lottery when they are in charge of the chance move. This finding is amplified when self-selection is possible and mitigated when a well-diversified default portfolio is offered. Presenting sequences of chance moves prior to investment does not affect diversification. In line with excessive extrapolation, the higher the number of observed positive prior outcomes, the more likely is a positive prediction and in turn a higher investment.

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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Journal article
Journal Journal of Behavioral Finance
Citation Index SSCI
WU-Journal-Rating new FIN-A, STRAT-B, WH-B
Language English
Title Illusion of control as a source of poor diversification - Experimental evidence
Volume 10
Number 1
Year 2009
Page from 55
Page to 67
URL http://www.informaworld.com/smpp/content~content=a908941240~db=all~order=page

Associations

People
Fellner, Gerlinde (Former researcher)
Organization
Institute for Economic Policy and Industrial Economics IN (Details)
Research areas (Ă–STAT Classification 'Statistik Austria')
5300 Economics (Details)
5513 Behavioural psychology (Details)
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