How to Alleviate Correlation Neglect in Investment Decisions

Published Online:https://doi.org/10.1287/mnsc.2022.4535

References

  • Aarbu KO, Schroyen F (2018) Attitudes toward large income risk in welfare states: An international comparison. Economica 85(340):846–872.CrossrefGoogle Scholar
  • Becker CK, Ert E, Trautmann ST, Van De Kuilen G (2020) Experiencing risk: Higher-order risk attitudes in description- and experience-based decisions. J. Experiment. Psych. Learn. Memory Cognition 47(5):727–746.Google Scholar
  • Benartzi S (2001) Excessive extrapolation and the allocation of 401(k) accounts to company stock. J. Finance 56(5):1747–1764.CrossrefGoogle Scholar
  • Benartzi S, Thaler RH (2001) Naive diversification strategies in defined contribution saving plans. Amer. Econom. Rev. 91(1):79–98.CrossrefGoogle Scholar
  • Bradbury MAS, Hens T, Zeisberger S (2015) Improving investment decisions with simulated experience. Rev. Finance 19(10):1019–1052.CrossrefGoogle Scholar
  • Chen DL, Schonger M, Wickens C (2016) oTree: An open-source platform for laboratory, online, and field experiments. J. Behav. Experiment. Finance 9:88–97.CrossrefGoogle Scholar
  • Chinco A, Hartzmark SM, Sussman AB (2020) A new test of risk factor relevance. J. Finance. 77(4):2183–2238.Google Scholar
  • Cokely ET, Galesic M, Schulz E, Ghazal S (2012) Measuring risk literacy: The Berlin numeracy test. Judgment Decision Making 7(1):25–47.CrossrefGoogle Scholar
  • D’Acunto F, Prabhala N, Rossi AG (2019) The promises and pitfalls of robo-advising. Rev. Financial Stud. 32(5):1983–2020.CrossrefGoogle Scholar
  • Eyster E, Weizsäcker G (2016) Correlation neglect in portfolio choice: Laboratory evidence. Working paper, Department of Economics, London School of Economics School of Economics and Business, Humboldt University of Berlin.Google Scholar
  • Fernandes D, Lynch JG Jr, Netemeyer RG (2014) Financial literacy, financial education, and downstream financial behaviors. Management Sci. 60(8):1861–1883.LinkGoogle Scholar
  • Fischbacher U (2007) z-Tree: Zurich toolbox for ready-made economic experiments. Experiment. Econom. 10:171–178.CrossrefGoogle Scholar
  • Fox CR, Hadar L (2006) Decisions from experience—sampling error + prospect theory: Reconsidering Hertwig, Barron, Weber & Erev (2004). Judgment Decision Making 1(2):159–161.CrossrefGoogle Scholar
  • Friend I, Blume ME (1975) The demand for risky assets. Amer. Econom. Rev. 65(5):900–922.Google Scholar
  • Greiner B (2003) An online recruitement system for economic experiments. Forschung Wissenschaftliches Rechnen 63:79–93.Google Scholar
  • Grinblatt M, Keloharju M (2001) How distance, language, and culture influence stockholdings and trades. J. Finance 56(3):1053–1073.CrossrefGoogle Scholar
  • Hertwig R (2017) When to consider boosting: Some rules for policy-makers. Behav. Public Policy 1(2):143–161.CrossrefGoogle Scholar
  • Kallir I, Sonsino D (2009) The neglect of correlation in allocation decisions. Southern Econom. J. 75(4):1045–1066.CrossrefGoogle Scholar
  • Kaufmann C, Weber M, Haisley E (2013) The role of experience sampling and graphical displays on one’s investment risk appetite. Management Sci. 59(2):323–340.LinkGoogle Scholar
  • Kimball MS, Sahm CR, Shapiro MD (2008) Imputing risk tolerance from survey responses. J. Amer. Statist. Assoc. 103(483):1028–1038.CrossrefGoogle Scholar
  • Kroll Y, Levy H, Rapoport A (1988) Experimental tests of the separation theorem and the capital asset pricing model author. Amer. Econom. Rev. 78(3):500–519.Google Scholar
  • Laudenbach C, Weber A, Wohlfart J (2021) Beliefs about the stock market and investment choices: Evidence from a field experiment. Working paper, University of Bonn, Goethe University Frankfurt, University of Copenhagen.Google Scholar
  • Lehtinen A, Keloharju M (2015) Shareownership in Finland 2015. Nordic J. Bus. 64(3):182–206.Google Scholar
  • Malmendier U, Nagel S (2011) Depression babies: Do macroeconomic experiences affect risk taking? Quart. J. Econom. 126(1):373–416.CrossrefGoogle Scholar
  • Markowitz HM (1952) Portfolio selection. J. Finance 7(1):77–91.Google Scholar
  • Matthies B (2021) Biased assessment of comovement. Working paper, University of Notre Dame, Notre Dame, IN.Google Scholar
  • Metrick A (1995) A natural experiment in “Jeopardy!” Amer. Econom. Rev. 85(1):240–253.Google Scholar
  • Paravisini D, Rappoport V, Ravina E (2017) Risk aversion and wealth: Evidence from person-to-person lending portfolios. Management Sci. 63(2):279–297.LinkGoogle Scholar
  • Reinholtz N, Fernbach PM, De Langhe B (2021) Do people understand the benefit of diversification? Management Sci. 67(12):7291–7950.Google Scholar
  • Sanborn AN, Chater N (2016) Bayesian brains without probabilities. Trends Cognitive Sci. 20(12):883–893.CrossrefGoogle Scholar
  • Ungeheuer M, Weber M (2021) The perception of dependence, investment decisions, and stock prices. J. Finance 76(2):797–844.CrossrefGoogle Scholar
  • Wunderlich K, Symmonds M, Bossaerts P, Dolan RJ (2011) Hedging your bets by learning reward correlations in the human brain. Neuron 71(6):1141–1152.CrossrefGoogle Scholar
INFORMS site uses cookies to store information on your computer. Some are essential to make our site work; Others help us improve the user experience. By using this site, you consent to the placement of these cookies. Please read our Privacy Statement to learn more.