We examine the long-run impact of exposure to a traumatic event on risk attitudes. We estimate risk aversion of those who experienced the Korean War at different ages to identify a sensitive period for risk attitude formation. This major war broke out suddenly, and the impact of the war on...

We examine the impact of return predictability and parameter uncertainty on investors' long-term portfolio allocations in the context of disappointment aversion. We find persisting horizon effects, with stocks appearing progressively more attractive at longer horizons as opposed to shorter ones....

The notion of optimism or pessimism is defined in the psychology literature in terms of forecasting where the term is used more generally than in statistics. Here we use the theory of loss aversion combined with Bayesian forecasting to propose rather precise definitions of optimism and...