Search results for "Aversion"
showing 10 items of 181 documents
Why retail investors traded equity during the pandemic? An application of artificial neural networks to examine behavioral biases
2021
Behavioral biases are known to influence the investment decisions of retail investors. Indeed, extant research has revealed interesting findings in this regard. However, the literature on the impact of these biases on millennials' trading activity, particularly during a health crisis like the COVID-19 pandemic, as well as the equity recommendation intentions of such investors, is limited. The present study addressed these gaps by investigating the influence of eight behavioral biases: overconfidence and self-attribution, over-optimism, hindsight, representativeness, anchoring, loss aversion, mental accounting, and herding on the trading activity and recommendation intentions of millennials …
Gender, self-confidence, sports, and preferences for competition
2016
In the last years, research in economics has shown a gender gap in the willingness to compete with women shying away from competition more than men do. This gender difference in preferences towards competition has been considered a critical factor in explaining the small percentage of women found in top-level positions in business, science, or politics. Therefore, in order to improve women job prospects, research and policy interventions try to offer incentives for women to increase competitive behavior. However, other recent studies specifically point at men¿s competitive behavior as the responsible for some of the financial markets malfunctions, suggesting that an influx of talented women…
Risk aversion in prediction markets: A framed-field experiment
2016
International audience; To make better decisions today, companies and other economic agents are interested in getting accurate predictions of future events. Prediction markets can, at least potentially, give those accurate forecasts for the probability of the event by aggregating information from traders. However, formal studies highlight that the risk attitudes of market participants may bias the market equilibrium prices, and consequently make the prediction unreliable. This research examines the effect of participants' risk attitudes on prediction market prices, through a framed field experiment on the two semifinals at the 2015 NCAA Men's Division Basketball Tournament. The results of t…
Prospect theory and stochastic multicriteria acceptability analysis (SMAA)
2009
Abstract We consider problems where multiple decision makers (DMs) want to choose their most preferred alternative from a finite set based on multiple criteria. Several approaches to support DMs in such problems have been suggested. Prospect theory has appealed to researchers through its descriptive power, but rare attempts have been made to apply it to support multicriteria decision making. The basic idea of prospect theory is that alternatives are evaluated by a difference function in terms of gains and losses with respect to a reference point. The function is suggested to be concave for gains and convex for losses and steeper for losses than for gains. Stochastic multicriteria acceptabil…
Incentive Schemes, Private Information and the Double-Edged Role of Competition for Agents
2013
This paper examines the effect of imperfect labor market competition on the efficiency of compensation schemes in a setting with moral hazard and risk-averse agents, who have private information on their productivity. Two vertically differentiated firms compete for agents by offering contracts with fixed and variable payments. The superior firm employs both agent types in equilibrium, but the competitive pressure exerted by the inferior firm has a strong impact on contract design: For high degrees of vertical differentiation, i.e. low competition, low-ability agents are under-incentivized and exert too little effort. For high degrees of competition, high-ability agents are over-incentivized…
A note on risk aversion and learning behavior
1995
Abstract This paper analyzes the learning behavior of a risk-averse agent. We find two conflicting effects in the experimental behavior: a stronger preference for the ex post reduction in uncertainty, but ex ante the returns to information are more uncertain.
A Problem of Optimization in a Case of Foreign Investment
2000
The aim of the paper is to solve an optimization problem in an economic system with a central bank and a set of private agents. Each agent aims to maximize her expected utility, with rational expectations and being risk averse. The agents follow a profitability-risk criterium to face the portfolio diversification problem between foreign or domestic investment. An explicit formula for the optimal amount of foreign investment as a function of the expected exchange rate and an explicit formula for the exchange rate are obtained. These formulas show the hard influence of the expected exchange rate, the variance and the risk aversion on the agents’ decisions.
Impact of Risk Aversion on Bidder's Optimal Strategy in Takeover Contests
2008
We consider a takeover setting in which bidders are risk averse and study aversion's consequences on their strategy. We found that when bidders are risk averse, under some conditions, their overbidding depends on the size of toeholds they hold. We show that there is a threshold under that a bidder doesn't overbid into the takeover process and becomes aggressive above that treshold. However, if the overbidding increases in toeholds size, it decreases in valuation. Without toeholds, takeovers's results are similar if bidders are averse or neutral risk.
General Equilibrium Models of Monopolistic Competition: CRRA Versus CARA
2005
We analyze a class of "large group" Chamberlinian monopolistic competition models using multiplicatively quasi-separable (MQS) and additively quasi-separable (AQS) functions. We first prove that the MQS and AQS functions are equivalent to the "constant relative risk aversion" (CRRA) and "constant absolute risk aversion" (CARA) classes of functions, respectively. Whereas both approaches allow for closed-form solutions, only the AQS functions yield profit-maximizing prices that decrease in the mass of competing firms. We then characterize the equilibrium in both cases and discuss some possible applications of the AQS framework to trade, growth, and development.
Hold up and intergenerational transmission of preferences
2004
This paper focuses on the formation, evolution and stability of the distribution of preferences in the population and its relationship with the investment and bargaining strategies in a simplified hold up problem. More precisely, in our model a population of infinitely-lived players (say, for example, firms) with homogeneous selfish or self-regarding preferences is pair-wise matched at each period with a population of an equal size of short-lived players (say, for example, workers) with heterogeneous preferences. Both types of player play a two-stage game. In the first stage, they decide separately but simultaneously whether to make a general or a relation-specific investment. The latter ty…