Comparisons with counterfactual outcomes can influence choices in sequential decisions. We examine the effect of anticipated regret, and social takeover - the knowledge that someone else might take one's place - on persistence on an investment task. Some participants received feedback about what...

This paper offers a continuous time, general equilibrium model where a risky asset is traded among risk-averse overconfident investors. Two kinds of overconfidence are introduced: investors exhibit relative overconfidence if each investor believes her model is better than others' and aggregate...

This essay reviews Allan Farnsworth's final book, Alleviating Mistakes: Reversal and Forgiveness for Flawed Perceptions (Oxford U. Press 2004). There are many kinds of mistakes. One kind - a rational, well-intended decision or act that results in unanticipated, negative consequences - was the...

Overall, 72 subjects invest their endowment in four risky assets. Each combination of assets yields the same expected return and variance of returns. Illusion of expertise prevails when one prefers nevertheless the self-selected portfolio. After being randomly assigned to groups of four,...

Many decision contexts require economic actors to learn from something they do not see, yet corresponding evidence on people's cognition is scarce. In a tightly structured and transparent laboratory experiment, many subjects fully neglect what they do not see. A series of treatment variations...

Optimistic beliefs affect important areas of economic decision making, yet direct knowledge on how belief biases operate remains limited. To better understand these biases I introduce a theoretical framework that trades off anticipatory benefits against two potential costs of forming biased...

Panel conditioning occurs when participation in previous survey rounds affects how respondents answer questions in later rounds. I document panel conditioning effects in reported inflation expectations and other responses in the Federal Reserve Bank of New York Survey of Consumer Expectations....

The Kalman Filter has been called one of the greatest inventions in statistics during the 20th century. Its purpose is to measure the state of a system by processing the noisy data received from different electronic sensors. In comparison, a useful resource for managers in their effort to make...

Concepts from information theory are utilized to study the effects of entropy on the behavior of finance systems and variables of interest. From this analysis, a common entropic measure was derived that determines the structure and evolution of a wide variety of financial topologies. This...

Upon observing a signal, a Bayesian decision maker updates her probability distribution over the state space, chooses an action, and receives a payoff that depends on the state and the action taken. An information structure determines the set of possible signals and the probability of each...