Breunig, Christoph (HU Berlin)
Huck, Steffen (WZB Berlin and UCL)
Schmidt, Tobias (QuantCo)
Weizsäcker, Georg (HU Berlin and DIW Berlin)
We study an investment experiment with a representative sample of German households. Respondents invest in a safe asset and a risky asset whose return is tied to the German stock market. Experimental investments correlate with beliefs about stock market returns and exhibit desirable external validity at least in one respect: they predict real-life stock market participation. But many households are unresponsive to an exogenous increase in the risky asset’s return. The data analysis and a series of additional laboratory experiments suggest that task complexity decreases the responsiveness to incentives. Modifying the safe asset’s return has a larger effect on behaviour than modifying the risky asset’s return.
stock market expectations; stock market participation; portfolio choice; financial literacy; complexity
D01; D14; D84; G11