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Optimism bias is inconsistent with the independence of decision weights and payoffs found in models of choice under … optimistically biased, we propose an alternative model of risky choice, affective decision making, where decision weights - which we … label affective or perceived risk - are endogenized. Affective decision making (ADM) is a strategic model of choice under …
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The VIX, the stock market option-based implied volatility, strongly co-moves with measures of the monetary policy stance. When decomposing the VIX into two components, a proxy for risk aversion and expected stock market volatility ("uncertainty"), we find that a lax monetary policy decreases...
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