This study compares the performance of Prospect Theory versus Stochastic Expected Utility Theory at fitting data on 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....

This paper explores the use of the anchoring and adjustment heuristic by decision makers in a financial market; in particular, the degree to which horserace bettors anchor their probability judgments on the advantage afforded by a horse's barrier-position. The results suggest that under certain...