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We criticize ad-hoc tests of return predictability, like those presented by Li and Wang (2025), which are purely motivated by statistical associations. Without ex-ante hypotheses grounded in theory or evidence on portfolio choice, it is difficult to say what we learn from such correlation exercises. We then discuss how convincing progress can be made in uncovering the foundations of portfolio choice and asset pricing, drawing on our own experimental research for illustration.
Keywords:
Investment decisions,
Diversification,
Correlation neglect,
Risk taking,
Asset pricing,
Experimental research,
C91,
G41,
G11,
G12
© 2025 Michael Ungeheuer and Martin Weber
2025
Michael Ungeheuer and Martin Weber
Licensed re-use rights only
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