Investor Behaviour: Experimental Studies on Cognitive and Social Factorsof Influence

Financial markets frequently deviate from postulatedefficiency, which is largely caused by theirrationalities" of investors. This book contributesto the understanding of how investment strategies aredriven by psychological forces. Two of the threepresented studies provide evidence on the occurrenceand consequences of egocentric biases such asoverconfidence and illusion of control. The thirdstudy provides a novel behavioural explanation forthe equity home bias an instance of internationallypoorly diversified portfolios based on socialidentity. The presented psychological phenomena canhardly be investigated with real financial marketdata. Hence experimental methods are used toidentify the fundamental cause-effectrelationships in a controlled way. This book presentspieces of new evidence on decision making in theinterdisciplinary field of economics finance andpsychology and provides insights intostate-of-the-art experimental economics research."