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Welcome to our experiment! In this experiment, you will make investment decisions in a financial market with the same 5 people for 20 rounds. In these rounds, you can earn Points.The exchange rate is 100 Points = 1 Dollar. The maximum payoff is 7 dollars.

Your task

You and the other five people will act as fund managers. Each of you manages a fund invested by other investors (the experimenter). At the beginning of the experiment, you start with a fund wealth of 300 Points. You have to decide in each of twenty rounds, what percentage of fund wealth you want to invest at a risk-free rate of 2.5% and the percentage you wish to invest in a stock index. The development of the stock index reflects the price development of a basket of shares and is based on actual historical data. In the last 20 years, this development is characterized by price fluctuations. In this round, the stock index earned a return of 11.0% and has a standard deviation of the returns of 30.2%.

Here are some examples on the likelihood of various return fluctuations of stock index:

In 50 out of 100 cases, the return lies between −9.4% and 31.4%.

In 75 out of 100 cases, the return lies between −23.7% and 45.7%.

In 90 out of 100 cases, the return lies between −38.7% and 60.7%.

In 95 out of 100 cases, the return lies between −48.2% and 70.2%.

To better understand the return distribution with a mean of 11.0% and a standard deviation of 30.2%, please draw 30 times from this distribution by clicking on the “Draw return” button. The draws are independent for each participant. Every time you click on the “Draw return” button, a new return is drawn from the distribution and displayed on the screen. Together, the draws give you a feeling for the stock index changes from round to round.

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It is important that if you leave halfway, you will not get any payoff.

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