Marc Oliver Rieger

Universität Trier · Department of Business Administration

Can television have a mitigating effect on xenophobia? To explore this question, we investigate a natural experiment in which individuals in some regions of East Germany could not—due to their geographic location—consume West German television until 1989. By analyzing survey data from the periods before and after German reunification, we provide ev...

In this paper, the relation between the signs of recent returns (an up-down pattern) and the net trading of individual investors is studied. Using our comprehensive dataset from the Taiwan Stock Exchange, we find that following positive days, individual investors sell more stocks than they buy — a negative buy-sell imbalance — while following negat...

Even three decades after the end of communism in Eastern Europe, there are still observable differences in financial risk and time preferences compared to Western Europe. Using data from two large-scale surveys – one including European countries (INTRA) and one for West and East Germany (SOEP) – we show that the causes of these differences are not...

The data presented here contain information on cheating behavior from experiments and general self-reported attitudes related to honesty-related social norms and trust, together with individual-level demographic variables. Our sample included 493 university students in five countries, namely, Germany, Vietnam, Taiwan, China, and Japan. The experime...

In the past decades, a multitude of behavioral biases with regard to financial decision-making have been found. We show that nine common judgment and decision biases can be reduced to three main latent factors that are related to belief-updating, self-judgment, and valuation. The three-factor solution can be replicated in both Taiwanese and German...

We conduct an experiment on dishonesty in China, Japan, Germany, Taiwan, and Vietnam to examine country differences in cheating behaviours, using the matrix task paradigm. Our results indicate that studies about honesty vary substantially when different tasks are used.

We study planned changes in protective routines after the COVID-19 pandemic: in a survey in Germany among >650 respondents, we find that the majority plans to use face masks in certain situations even after the end of the pandemic. We observe that this willingness is strongly related to the perception that there is something to be learned from East...

The COVID-19 pandemic has caused dramatic changes in the way people around the globe live, and has had a profound negative impact on the global economy. Much of this negative impact did not result from the disease itself, but from the lockdown restrictions imposed to contain the spread of the virus. We investigate how national stock market indices...

Different from diversification of stocks, there are two strategies to diversify portfolios consisting of options: one is to combine options on single underlying stocks, and the other one is to buy an option based on the index of these stocks. In this paper we analyse which diversification strategy is optimal for classical rational investors with co...

A typical behavioral pattern of investors is to reduce stock market exposure after a crash. This leads to a typical “buy high, sell low” strategy that is detrimental to long-run wealth accumulation. We suggest a simple nudge based on the IKEA effect and the endowment effect that reduces this problem substantially: actively involving investors in th...

Time preferences are central to human decision making; therefore, a thorough understanding of their international differences is highly relevant. Previous measurements, however, vary widely in their methodology, from questions answered on the Likert scale to lottery-type questions. We show that these different measurements correlate to a large degr...

Financial (il-)literacy and its effects have been studied extensively in recent years. The measurement of this concept is, however, tricky and numerous measurement instruments exist. In this paper, we study the connection between these measures empirically. We find that these measures are often only slightly related and that this is a so-far overlo...

Cohn et al. (2019) designed the field experiment about the lost wallets across 40 countries to examine whether people attempt to contact the owners to return the 17,000 wallets. We discussed the design flaw in their experimental settings by reanalyzing the relationship between the rates of wallet return, in the Cohn et al. (2019)’s data, and the pe...

We construct a derivative that depends on the SPY and VIX and, in this way, incorporates both the market risk premium and the variance risk premium. We show that the product’s Sharpe ratio is higher than the SPY Sharpe ratio. If we had invested $10,000 into the product, the product’s payoff would have been about $60,000 at the end of 2018. In compa...

This data article describes the attitudes of German and Chinese respondents to some measures taken against the COVID-19 pandemic such as social distancing and face masks wearing, as well as their trust in government actions. The data were collected through six online surveys conducted between March 23 to September 15 2020 from 865 participants in G...

Stock market participation differs a lot across countries. Cultural dimensions could be a potential factor for that. We show that indeed uncertainty avoidance (UAI) is linked to rates of stock market participation across countries. We can show even more that uncertainty avoidance has an indirect effect through loss aversion on stock market particip...

In a survey among 250 subjects recruited at a German university and predominantly university students, we elicit opinions about social distancing, i. e., the necessity to keep away from other people to slow down the speed of the ongoing SARS-CoV-2 epidemics. The good news is that most students are supportive to it. A minority, however, does not com...

We conduct an online experiment with 96 participants to examine the effect of separation of time horizons on investment decisions. We find that when asked to invest in short and long-time horizons separately rather than simultaneously, participants tend to invest more in risky assets, especially for the long-time horizon. They also tend to revise t...

Introduction: During the COVID-19 pandemic, it has been advised to wear masks. Attitudes toward wearing masks have not been investigated well. We want to provide data on whether and why people would be willing to wear masks in order to suggest ways for enhancing compliance. Methods: We conducted a survey among 206 participants on April 20 to 22, 20...

Introduction: Once a vaccine against COVID-19 is available, the question of how to convince as many people as possible to get vaccinated will arise. We test three different strategies to reach this goal: two selfish motivations (highlighting personal survival risk or the inconveniences in the event of getting infected) and altruism (reducing the da...

This book provides a comprehensive overview of the emerging field of cultural finance. It summarizes research results of cultural differences in financial decision making and financial markets. Many of the results have been published in leading academic journals over the last ten years but some are presented here for the first time. The book is bas...

We examine the role of extreme positive returns in the cross-section of stock returns in seven countries. While Bali et al. (J Financ Econ 99:427–446, 2011) find a significantly negative relation between the maximum daily returns over the past month (MAX) and the expected returns in the following month, we find that this relation disappears and eve...

Financial market is complete if any consumption stream can be attained with at least one initial wealth. The necessary and sufficient condition for a financial market to be complete is that each two-period submarket is complete.

f is closed: defined by ≤ 0

Consider a two-period economy with uncertainty in the second period. Consumption is in terms of a single consumer good. In the second period there are S many possible states and every consumer aims to maximize the consumption across states. There are I many consumers with utility functions Uⁱ(strictly increasing, concave and continuous). The consum...

In this part, we present a large number of exercises that can accompany our book Financial Economics. They are sorted by the chapters of the book. Within each chapter, the exercises are roughly sorted by topics such that topics covered earlier in the chapter come first. A second criterion is by the difficulty (the easier exercises first). Many exer...

In this part, we provide the solutions to the exercises from Part I. Sometimes we will be very brief (if we think that this is sufficient to understand the solution), sometimes we will be a bit more wordy (if the solution requires some careful argument).

There are two time periods t = 0, 1 and two states in the second period s = 1, 2. There are two consumers i = 1, 2. The first consumer is rich today and poor tomorrow, w¹ = (1, 0, 0). The second is rich tomorrow and poor today, w² = (0, 1, 1). There are two Arrow securities, i.e. \(A = \begin {pmatrix}1 & 0 \\ 0 & 1\end {pmatrix}\). The first consu...

The efficiency of the measure can be determined through computing the expected utility of playing the lottery of illegal parking under that measure. The measure with the lowest expected utility of illegal parking should be taken.

d(W2)=2WdW+122(dW)2=2WdW+dt.

Consider the following game: you roll a dice, if you roll a 6, you win 6 million € otherwise you win nothing. You can play only once. Let us assume your expected utility function is given by u(x) =log10x (base 10 logarithm, i.e., log10(10ⁿ) = n) and your initial wealth is 10,000 €.

Suppose S = 1 and wealth in period one is produced from wealth in period zero by the production function \(\sqrt {\quad}\). Define the production technology set \(Y \subset \mathbb {R}^2\) and check whether the properties (i)–(v) given in Assumption 6.1 in the book are satisfied.

Let W be a Wiener process. Find the expressions for d(W2)and(dW)2.

Let us consider the following three-period model where the returns of two assets are marked at each node

We investigate a framework for non-cooperative games in normal form where players have behavioral preferences following Prospect Theory (PT) or Cumulative Prospect Theory (CPT). On theoretical grounds CPT is usually considered to be the superior model, since it normally does not violate first order stochastic dominance in lottery choices. We find,...

This paper investigates corporate hedging under regret aversion. Regret-averse firms try to avoid deviations of their hedging policy from the ex post best policy. The study presents a model of a firm that faces uncertain prices and seeks to hedge both profit risk and regret risk with derivatives. It characterizes optimal hedge positions and shows t...

This book offers a concise introduction to the field of financial economics and presents, for the first time, recent behavioral finance research findings that help us to understand many puzzles in traditional finance. Tailor-made for master’s and PhD students, it includes tests and exercises that enable students to keep track of their progress. Par...

Stocks are riskier than bonds. This causes a risk premium for stocks. That the size of this premium, however, seems to be larger than risk aversion alone can explain the so-called “equity premium puzzle”. One possible explanation is the inclusion of a degree of ambiguity in stock returns to account for an additional ambiguity premium, whose size de...

Purpose The purpose of this paper is to investigate segmentations by finance-related attitudes and behavior of financial consumers in Switzerland and Vietnam. Design/methodology/approach The authors replicated the questionnaire measuring attitudes toward financial affairs as used in the study of Fünfgeld and Wang (2009). In order to extract fact...

The data article describes self-assessments of 621 Vietnamese retail investors on their trading behavior, psychological attributes and socio-demographic characteristics. The dataset was obtained from a randomized survey of 3144 Vietnamese participants on financial attitudes and practice that has been used in Phan et al. [5]. A supplemental material...

In this comment, we demonstrate that the decision model proposed by Cenci et al. (2015) can be reformulated as an extension of normalized Prospect Theory and is also related to Disappoint Aversion. These reformulations allow us to understand better the novel ideas in this model and why its choice of the weighting function is in a certain sense natu...

Analyzing a large sample of U.S. firms, we show that the asymmetry of stock return volatility is positively related to investor attention and differences of opinion. Using the number of analysts following a given firm to capture attention and the dispersion in analyst forecasts as a common proxy for differences of opinion, we show that the two effe...

We conduct a standardized survey on risk preferences in 53 countries worldwide and estimate cumulative prospect theory parameters from the data. The parameter estimates show that significant differences on the cross-country level are to some extent robust and related to economic and cultural differences. In particular, a closer look on probability...

We present a geometric characterization of acceptance sets for monotone, co-monotone and convex risk measures on finite state spaces. Geometrically, such acceptance sets can be represented by convex polygons with edges only on certain hyperplanes. We also provide some lower dimensional examples, and study acceptance sets for value at risk and expec...

We analyze a large data set of private banking portfolios in Switzerland of a major bank with the unique feature that parts of the portfolios were managed by the bank, parts were advisory portfolios. To correct the heterogeneity of individual investors, we apply a mixture model and a cluster analysis. Our results suggest that there is indeed a subs...

Previous literature on cash management has revealed that firms hoard cash to protect themselves against external financing constraints that might limit future capital budgeting policies. In a theoretical model based on this finding, we analyze how investors’ attitude toward uncertain investment returns affects the valuation of cash and the amount o...

decisions on the mean-variance approach. This helped us to develop a model for pricing assets on a financial market, the CAPM. In this chapter we want to generalize this model in that we relax the assumptions on the preferences of the investors.

How should we decide? And how do we decide? These are the two central questions of Decision Theory: in the prescriptive (rational) approach we ask how rational decisions should be made, and in the descriptive (behavioral) approach we model the actual decisions made by individuals. Whereas the study of rational decisions is classical, behavioral the...

Indeed we will start our journey to financial markets with only one step: the step from one time period (in which we invest into assets) to another time period (in which the assets pay off). To make this two-period model even simpler, we assume in this chapter mean-variance preferences. We will see later that this model is a special case of two-per...

We will now extend the financial economy \(\mathcal{E}_{F}\) to cover problems of production and production units, i.e. firms. Among other things, this allows conclusions about the behaviour of firms in markets. So far we assumed bond payoffs to be exogenous, ignoring the decision-making process of the bonds’ issuers. A precise theory of the firm w...

Trading on a stock market is obviously a discrete process, as it consists of single transactions performed at distinct times. There are, however, so many transactions in such a high frequency that it is for many applications better to model them in a time-continuous setting, i.e., to assume that they take place at all times. In this chapter we will...

In the previous two chapters, we have restricted ourselves to the case of two time periods, one for investing and one for receiving payoffs. For many applications it is, however, necessary to allow for models with more than two time periods. In particular one can then study re-trading on the arrival of new information. Nevertheless we will see that...

So far we have assumed common knowledge about the (state-contingent) pay-offs of assets. Imagine now that some agents know the payoffs better than others. Then – besides intertemporal substitution, risk sharing and betting on the occurrence of the states of the world – a seller of an asset might want to sell it because he knows it has very low pay-...