Human judgments are systematically affected by various biases and distortions. The main goal of our study is to analyze the effects of five well-documented behavioral biases—namely, the disposition effect, herd behavior, availability heuristic, gambler’s fallacy and hot hand fallacy—on the...

We propose a model of instrumental belief choice under loss aversion. When new information arrives, an agent is prompted to abandon her prior. However, potential posteriors may induce her to take actions that generate a lower utility in some states than actions induced by her prior. These losses...

This study examines whether heterogeneous beliefs contribute to the incidence of the disposition effect. We measure optimism using elicited beliefs from incentivized experiments and surveys and link these measures to investment decisions using administrative register data. We find that...

We investigate the relationship between subjective probabilities of future stock market returns and decisions about stockholding. Specifically, we examine whether acting upon subjective probabilities is confined to individuals with high cognitive skills. We explore this question using data from...

Instrumental variable estimation requires untestable exclusion restrictions. With policy effects on individual outcomes, there is typically a time interval between the moment the agent realizes that he may be exposed to the policy and the actual exposure or the announcement of the actual...

Science evolves in the long run. Law rules in the present. This potential temporal disconnect leads to a Hayekian “knowledge problem”, a challenge increasingly raised against behavioral law and economics: Empirical findings are deemed too uncertain to provide a solid basis for legal...