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Prospect Theory and Asset Prices
Barberis, Nicholas - 1999
We propose a new framework for pricing assets, derived in part from the traditional consumption-based approach, but which also incorporates two long-standing ideas in psychology: prospect theory, and evidence on how prior outcomes affect risky choice. Consistent with prospect theory, the...
Persistent link: https://www.econbiz.de/10012471569
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Persuading with Anecdotes
Haghtalab, Nika; Immorlica, Nicole; Lucier, Brendan; … - National Bureau of Economic Research - 2021
We study a model of social learning and communication using hard anecdotal evidence. There are two Bayesian agents (a sender and a receiver) who wish to communicate. The receiver must take an action whose payoff depends on their personal preferences and an unknown state of the world. The sender...
Persistent link: https://www.econbiz.de/10012510540
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Myopic Loss Aversion and Investment Decisions : from the Laboratory to the Field
Iqbal, Kazi; Islam, Asad; List, John A.; Nguyen, Vy - National Bureau of Economic Research - 2021
Whether, and to what extent, behavioral anomalies uncovered in the lab manifest themselves in the field remains of first order importance in finance and economics. We begin by examining behavior of retail traders/investors making investment decisions in constructed laboratory markets. Our...
Persistent link: https://www.econbiz.de/10012510609
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Loss Aversion or Lack of Trust : Why Does Loss Framing Work to Encourage Preventative Health Behaviors?
Beam, Emily A.; Masatlioglu, Yusufcan; Watson, Tara; … - National Bureau of Economic Research - 2022
We implemented a field experiment designed to increase participants' willingness to visit a health clinic. We find differential responses to a $50 incentive framed as a loss versus framed as a gain. We find little support for the notion that loss aversion is responsible for the effectiveness of...
Persistent link: https://www.econbiz.de/10013172128
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On Testing Continuity and the Detection of Failures
Backus, Matthew - 2019
Estimation of discontinuities is pervasive in applied economics: from the study of sheepskin effects to prospect theory and "bunching" of reported income on tax returns, models that predict discontinuities in outcomes are uniquely attractive for empirical testing. However, existing empirical...
Persistent link: https://www.econbiz.de/10012479965
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Expectations-Based Loss Aversion May Help Explain Seemingly Dominated Choices in Strategy-Proof Mechanisms
Dreyfuss, Bnaya - 2019
Deferred Acceptance (DA), a widely implemented algorithm, is meant to improve allocations: under classical preferences, it induces preference-concordant rankings. However, recent evidence shows that--in both real, large-stakes applications and experiments--participants frequently play seemingly...
Persistent link: https://www.econbiz.de/10012480338
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Revealed Preference Analysis with Framing Effects
Goldin, Jacob - 2018
In many settings, decision-makers' behavior is observed to vary based on seemingly arbitrary factors. Such framing … permit either partial- or point-identification of preferences for the decision-makers who choose consistently across frames …. Recovering population preferences requires understanding the empirical relationship between decision-makers' preferences and …
Persistent link: https://www.econbiz.de/10012480791
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Climatic Roots of Loss Aversion
Galor, Oded - 2018
This research explores the origins of loss aversion and the variation in its prevalence across regions, nations and ethnic group. It advances the hypothesis and establishes empirically that the evolution of loss aversion in the course of human history can be traced to the adaptation of humans to...
Persistent link: https://www.econbiz.de/10012480924
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Equity Concerns are Narrowly Framed
Exley, Christine L. - 2018
We show that individuals narrowly bracket their equity concerns. Across four experiments including 1,600 subjects, individuals equalize components of payoffs rather than overall payoffs. When earnings are comprised of "small tokens" worth 1 cent and "large tokens" worth 2 cents, subjects...
Persistent link: https://www.econbiz.de/10012480977
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Prospect Theory and Stock Market Anomalies
Barberis, Nicholas C. - 2020
We present a new model of asset prices in which investors evaluate risk according to prospect theory and examine its ability to explain 22 prominent stock market anomalies. The model incorporates all the elements of prospect theory, takes account of investors' prior gains and losses, and makes...
Persistent link: https://www.econbiz.de/10012481738