Behavioural portfolio theory revisited: lessons learned from the field

Faculty/Professorship: Finance  
Author(s): Oehler, Andreas  ; Horn, Matthias  
Title of the Journal: Accounting and Finance
ISSN: 0810-5391, 1467-629X
Corporate Body: Accounting Association of Australia and New Zealand
Publisher Information: Melbourne : Wiley-Blackwell
Year of publication: 2021
Volume: 61
Issue: S1
Pages: 1743-1774
Language(s): English
DOI: 10.1111/acfi.12643
We examine the relation between households’ wealth and relative risk aversion (RRA) in two different frameworks: the Behavioural Portfolio Theory (BPT) and Merton’s consumption and portfolio choice model (CPCM). We apply the BPT to field data for the first time and show that the BPT provides a better fit than the CPCM to explain the financial risk-taking of the households in Deutsche Bundesbank’s Panel on Household Finances survey. However, both models indicate decreasing RRA. While households’ education and financial literacy hardly improve the fit of either model, households show different risk-taking behaviour in accordance with their self-assessed risk attitude.
GND Keywords: Haushalt; Finanzlage; Moderne Portfoliotheorie; Behaviorismus; Risikobereitschaft
Keywords: household finance, relative risk aversion;, behavioural portfolio theory;, consumption and portfolio choice model, risk-taking
DDC Classification: 330;  
650 Management & public relations  
RVK Classification: QK 710   
Peer Reviewed: Ja
International Distribution: Ja
Type: Article
Release Date: 15. December 2021