The historic financial crisis in 2007 and 2008 seriously affected investors. In general, stock market values declined by about 50 percent but largely recovered from pre-crisis levels by the end of 2012 due in part to unprecedented stimulus efforts. Nonetheless, the cumulative return on stocks...

We provide a preference-based rationale for endogenous overconfidence. Horizon-dependent risk aversion, combined with a possibility to forget, can generate overconfidence and excessive risk taking in equilibrium. An "anxiety prone" agent, who is more risk-averse to imminent than to distant...

The equilibrium prices in asset markets, as stated by Keynes (1930): "...will be fixed at the point at which the sales of the bears and the purchases of the bulls are balanced." We propose a descriptive theory of finance explicating Keynes' claim that the prices of assets today equilibrate the...

We report the results of an experiment on selective exposure to information. A decision maker interested in learning about an uncertain state of the world can acquire information from one of two sources which have opposite biases: when informed on the state, they report it truthfully; when...

With a unique data set from New Zealand which allows us to assign each bet to individual bettors, we analyze the impact of experience on behavior and success in non-parimutuel (fixed odds) sports betting markets. We find that experienced bettors bet more on favorites than inexperienced bettors...

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...

Building on cross-sectional data for Austrian high school students from fifth to twelfth grade, we investigate the correlations between socio-economic background variables and a comprehensive set of variables related to financial decision-making (i.e., financial knowledge, behavioral...

We develop a general framework for measuring biases in expectation formation. The method is based on the insight that biases can be inferred from the response of forecast errors to past news. Empirically, biases are measured by flexibly estimating the impulse response function of forecast...