Presenter: Lukas Grahl, AU

Title: Inferring utility from individual investors' trading decisions

Abstract: We estimate utility functions from the portfolio choices of 5,000 German retail investors over more than two decades. We consider expected utility alongside models with non-linear and non-additive probabilities, including rank-dependent and ambiguity-based preferences. Allowing for investor heterogeneity, we assess which frameworks best describe observed behaviour. Our approach structurally recovers preference parameters from trading decisions and provides field evidence on the external validity of alternative decision-theoretic models in financial markets.

Organizers: Stefan Hirth and Mads Markvart Kjær