Financial decision making - The role of realization, portfolio composition and biased belief formation

The main goal of this dissertation thesis is to deepen the understanding of how investors make financial decisions. Each chapter consists of an experimental study in which the drivers of investment decisions are examined. The first study analyzes how realization affects the dynamics of risk-taking. The second study asks how the composition of winner and loser stocks of a portfolio influences the performance evaluation and willingness to invest in a portfolio. The third study evaluates how biased belief formation affects risk-taking in boom and bust markets. Finally, the forth study questions whether individuals follow a simple counting rule, implied by Bayes' Theorem, when updating their beliefs.