Skewness Seeking in a Dynamic Portfolio Choice Experiment

Juan D. Carrillo, Isabelle Brocas, Aleksandar Giga and Fernando Zapatero

No 11056, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We conduct a controlled laboratory experiment in which subjects dynamically choose to allocate their portfolio between (i) a safe asset, (ii) a risky asset and (iii) a skewed asset with negative expected value (a ?bet?), in an environment where they can sometimes choose to acquire some information about the performance of their peers. We find three distinct groups of individuals: 16% of subjects never buy the bet, 29% of subjects learn not to buy the bet and 55% subjects persist purchasing the bet throughout the experiment. Among the latter group, purchases are most frequent when subjects are rich and when it is their last opportunity. Our subjects are also interested in the wealth of others, especially relative to theirs. Indeed, a subject with low, medium and high wealth has a preference for finding out what is the minimum, average and maximum wealth in the session, respectively. We also find that subjects buy more bets when they are richer and (unexpectedly) learn that their peers outperform them.

Keywords: Laboratory experiment; Portfolio allocation; Skewed asset; Relative performance (search for similar items in EconPapers)
JEL-codes: C91 D03 D81 G11 (search for similar items in EconPapers)
Date: 2016-01
New Economics Papers: this item is included in nep-exp and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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