Prof. Dr. Christoph Merkle

Associate Professor of Finance

Christoph Merkle is Associate Professor of Finance at Kühne Logistics University. From 2012 to 2017 he was Assistant Professor of Finance and Banking at the University of Mannheim, where he also obtained his PhD. Before, he studied Economics at the University of Cologne. He was a visiting scholar at Duke University, Fuqua School of Business, and Aalto University.

Merkle’s research interests include Behavioral Finance, Household Finance, Experimental Economics, Decision Research, and Financial Forecasting. Among other topics, he analyzes how individual investors convert their beliefs and preferences into actions in financial markets. He has extensively studied phenomena such as investor overconfidence and loss aversion. He further analyzes how financial professionals (in particular analysts) process information and form expectations. In newer work, he explores imminent societal challenges such as digitalization and demographic change. For example, he examines financial technology companies (FinTechs) and how their customers accept them.

Merkle teaches courses on Corporate Finance, Corporate Valuation, Consumer Finance, International Finance, and Sustainable Financial Management. Besides KLU, he has taught at ALBA Graduate Business School Athens, University of Mannheim, University of Münster, and University of Cologne.

For more details about Christoph Merkle, including downloads of research articles and working papers, please visit his academic homepage at

Selected Publications

DOI: 10.1093/rof/rfz002 

Abstract: Abstract: We test the proposition that investors' ability to cope with financial losses is much better than they expect. In a panel survey of investors from a large bank in the UK, we ask for their subjective ratings of anticipated returns and experienced returns. The time period covered by the panel (2008-2010) is one where investors experienced frequent losses and gains in their portfolios. This period offers a unique setting to evaluate investors' hedonic experiences. We examine how the subjective ratings behave relative to expected portfolio returns and experienced portfolio returns. Loss aversion is strong for anticipated outcomes; investors are twice as sensitive to negative expected returns as to positive expected returns. However, when evaluating experienced returns, the effect diminishes by more than half and is well below commonly found loss aversion coefficients. This suggests that a large part of investors' financial loss aversion results from an affective forecasting error.

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Open reference in new window "Financial Loss Aversion Illusion"

DOI: 10.1016/j.finmar.2017.11.001 

Abstract: In a panel survey of brokerage clients in the United Kingdom, participants mostly perceive their own portfolio as no more volatile than the market portfolio. Taking into account observed portfolio betas, this implies a belief in very low idiosyncratic portfolio volatility, which is even negative for a considerable fraction of the studied investor population. Possible explanations are extreme overconfidence in combination with a misunderstanding of how market and portfolio volatility are related. The identified bias contributes to underdiversification, as a belief in negative idiosyncratic volatility conceals the true benefits of diversification. In an experiment, we confirm the existence of a belief in negative volatility and rule out the underestimation of beta as an alternative explanation.

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Open reference in new window "The Curious Case of Negative Volatility"

DOI: 10.1093/epolic/eix014 

Abstract: In a large online experiment, we relate the retirement timing decision to the disparity between the willingness-to-accept (WTA) and the willingness-to-pay (WTP). In the WTP treatment, participants indicate the maximum amount of monthly benefits they are willing to give up in order to retire early. In the WTA treatment, the minimum increase of monthly payments in order to delay retirement is elicited. Our results reveal that the framing of the decision problem strongly influences participants' reservation price for early retirement. The willingness-to-accept for early retirement is more than twice as high as the corresponding willingness-to-pay. Using actual values from the German social security system as market prices, we demonstrate that the presentation in a WTA frame can induce early retirement. In this frame, the implicit probability of retiring early increases by 30 percentage points.We further show that the disparity between WTA and WTP is correlated with loss aversion. Repeating the analysis with data from a representative household survey (German SAVE panel), we find similar results.

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Open reference in new window "Framing and Retirement Age: The Gap between Willingness-to-Accept and Willingness-to-Pay"

DOI: 10.1016/j.jbankfin.2017.07.009 

Abstract: Financial overconfidence leads to increased trading activity, higher risk taking, and less diversification. In a panel survey of online brokerage clients in the UK, we ask for stock market and portfolio expectations and derive several overconfidence measures from the responses. Overconfidence is identified in the sample in various forms. By matching survey data with participants’ transactions and portfolio holdings, we find an influence of overplacement on trading activity, of overprecision and overestimation on diversification, and of overprecision and overplacement on risk taking. We explore the evolution of overconfidence over time and identify a role of past success and hindsight on subsequent investor overconfidence in line with learning to be overconfident.

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Open reference in new window "Financial overconfidence over time: Foresight, hindsight, and insight of investors"

DOI: 10.1093/rof/rfw011 

Abstract: Return-chasing investors almost exclusively consider top-performing funds for their investment decisions. When drawing conclusions about the managerial skill of these top performers, they tend to neglect fund volatility and the cross-sectional information contained in the number of funds and the distribution of skill. In multiple surveys of sophisticated retail investors, we show that they do not fully understand the role of chance in experimental samples of fund populations. Respondents evaluate each fund in isolation and do not sufficiently account for fund volatility. They confuse risk taking with manager skill and are thus likely to over-allocate capital to lucky past winners.

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Open reference in new window "Fooled by Randomness: Investor Perception of Fund Manager Skill"

Academic Positions

Since 2017Associate Professor of Finance at Kühne Logistics University, Hamburg, Germany
2012-2017Assistant Professor of Finance at University of Mannheim, Mannheim, Germany
2015Visiting Researcher at Duke University, Fuqua School of Business, Durham, NC, USA
2013Visiting Researcher at Aalto University, School of Business, Helsinki, Finland
2010-2012Research and Teaching Assistant at University of Mannheim, Mannheim, Germany


2011PhD in Finance (Dr. rer.pol.) at University of Mannheim, Mannheim, Germany
2007M.A. Economics (Dipl.-Volkswirt) at University of Cologne, Cologne, Germany