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How do judgmental overconfidence and overoptimism shape innovative activity?
Herz, Holger; Schunk, Daniel; Zehnder, Christian - Institut für Volkswirtschaftslehre, … - 2013
that the connection between overconfidence and innovation is more complex than the previous literature suggests. In … innovative activity. While overoptimism is positively associated with innovation, judgmental overconfidence is negatively linked … to innovation. Our results indicate that future research is well advised to take into account that the relationship …
Persistent link: https://www.econbiz.de/10010817242
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Rationality on the Rise: Why Relative Risk Aversion Increases with Stake Size
Fehr-Duda, Helga; Bruhin, Adrian; Epper, Thomas; … - Institut für Volkswirtschaftslehre, … - 2007
How does risk tolerance vary with stake size? This important question cannot be adequately answered if framing effects … coherent change in relative risk aversion is observed for losses. The increase in relative risk aversion over gains cannot be …
Persistent link: https://www.econbiz.de/10005756603
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Risk and Rationality: The Effect of Incidental Mood on Probability Weighting
Fehr, Helga; Epper, Thomas; Bruhin, Adrian; Schubert, Renate - Institut für Volkswirtschaftslehre, … - 2007
When valuing risky prospects, people tend to overweight small probabilities and to underweight large probabilities. Nonlinear probability weighting has proven to be a robust empirical phenomenon and has been integrated in decision models, such as cumulative prospect theory. Based on a laboratory...
Persistent link: https://www.econbiz.de/10005756644
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Probability Weighting as Evolutionary Second-best
Herold, Florian; Netzer, Nick - Institut für Volkswirtschaftslehre, … - 2010
The economic concept of the second-best involves the idea that multiple simultaneous deviations from a hypothetical first-best optimum may be optimal once the first-best itself can no longer be achieved, since one distortion may partially compensate for another. Within an evolutionary framework,...
Persistent link: https://www.econbiz.de/10008526715
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Stochastic Expected Utility and Prospect Theory in a Horse Race: A Finite Mixture Approach
Bruhin, Adrian - Institut für Volkswirtschaftslehre, … - 2008
decision making under risk. Both theories incorporate well-known deviations from Expected Utility Maximization such as the … Allais paradox or the fourfold pattern of risk attitudes. Stochastic Expected Utility Theory parsimoniously extends the …
Persistent link: https://www.econbiz.de/10005566322
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Prospect Theory and the CAPM: A contradiction or coexistence?
Levy, Haim; Giorgi, Enrico De; Hens, Thorsten - Institut für Volkswirtschaftslehre, …
Under the assumption of normally distributed returns, we analyze whether the Cumulative Prospect Theory of Tversky and Kahneman (1992) is consistent with the Capital Asset Pricing Model. We find that in every financial market equilibrium the Security Market Line Theorem holds. However, under the...
Persistent link: https://www.econbiz.de/10005585616
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Loss Aversion? Not with Half-a-Million on the Table!
Blavatskyy, Pavlo; Pogrebna, Ganna - Institut für Volkswirtschaftslehre, … - 2006
In the television show Affari Tuoi a contestant is endowed with a sealed box containing a monetary prize between one cent and half a million euros. In the course of the show the contestant is offered to exchange her box for another sealed box with the same distribution of possible monetary...
Persistent link: https://www.econbiz.de/10005585659
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The Power of Positional Concerns
Torgler, Benno; Schmidt, Sascha L.; Frey, Bruno S. - Institut für Volkswirtschaftslehre, … - 2008
People care a great deal about their relative economic position and not solely about their absolute economic position. However, behavioral evidence is rare. This paper provides evidence on how the relative income position affects professional sports performances. Our analysis suggests that if a...
Persistent link: https://www.econbiz.de/10005040820
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The as-is journal review process: Let authors own their ideas
Torgler, Benno; Schmidt, Sascha L.; Frey, Bruno S. - Institut für Volkswirtschaftslehre, … - 2006
In this paper we present a two period model, where the agent's preferences are described by prospect theory as proposed by Kahneman and Tversky. We solve for the agent's portfolio decision. Our findings are that the changes in portfolio weights depend crucially on the reference point and the...
Persistent link: https://www.econbiz.de/10005040821
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Myopic Loss Aversion Revisited: The Effect of Probability Distortions in Choice Under Risk
Blavatskyy, Pavlo; Pogrebna, Ganna - Institut für Volkswirtschaftslehre, …
When the performance of a risky asset is frequently assessed, the probability of detecting a loss is high, which averts the loss averse investors. This effect is known as myopic loss aversion (MLA). This paper reexamines several recent experimental studies documenting the existence of MLA. A...
Persistent link: https://www.econbiz.de/10005627807