Fear in Asset Allocation During and After Stock Market Crashes An Experiment in Behavioral Finance

We test for the presence of fear in an experiment in which subjects make portfolio allocation decisions with market returns from the Great Crash of 1929. Half the subjects make allocation decisions prior to the market crash while the other half make allocation decisions at the start of the crash. The results show that subjects who start the experiment with declining stock returns allocate 8% less to stocks than subjects who start the experiment...