Behavioral Issues in Portfolio Decision Analysis

Abstract

In this paper we address the question of how people make decisions in the context of a knapsack problem, which is a simplified version of a portfolio project management problem. We expect people to be influenced by the biases described in the first chapters and therefore we carry out an experiment to test the reach of this effect. More specifically, our aim is to study to which degree people reach suboptimal solutions in the knapsack problem on different situations of difficulty and size of the problem. In an experiment carried out with Ztree we find out that there are some factors which influence in the performance obtained by participants and the number of people which reach an optimal solution. We also suggest some avenues of expansion of the experiment.