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Information characteristics and errors in expectations : experimental evidence
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Antoniou, Constantinos, Harrison, Glenn W., Lau, Morten and Read, Daniel (2017) Information characteristics and errors in expectations : experimental evidence. Journal of Financial and Quantitative Analysis, 52 (2). pp. 737-750. doi:10.1017/S0022109017000035 ISSN 0022-1090.
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Official URL: https://doi.org/10.1017/S0022109017000035
Abstract
We design an experiment to test the hypothesis that, in violation of Bayes Rule, some people respond more forcefully to the strength of information than to its weight. We provide incentives to motivate effort, use naturally occurring information, and control for risk attitude. We find that the strength-weight bias affects expectations, but that its magnitude is significantly lower than originally reported. Controls for non-linear utility further reduce the bias. Our results suggest that incentive compatibility and controls for risk attitude considerably affect inferences on errors in expectations.
| Item Type: | Journal Article | ||||||||
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| Subjects: | H Social Sciences > HG Finance | ||||||||
| Divisions: | Faculty of Social Sciences > Warwick Business School > Behavioural Science Faculty of Social Sciences > Warwick Business School > Finance Group Faculty of Social Sciences > Warwick Business School > Global Energy Faculty of Social Sciences > Warwick Business School |
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| Library of Congress Subject Headings (LCSH): | Finance -- Mathematical models, Financial risk, Gambling | ||||||||
| Journal or Publication Title: | Journal of Financial and Quantitative Analysis | ||||||||
| Publisher: | Cambridge University Press | ||||||||
| ISSN: | 0022-1090 | ||||||||
| Official Date: | April 2017 | ||||||||
| Dates: |
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| Volume: | 52 | ||||||||
| Number: | 2 | ||||||||
| Page Range: | pp. 737-750 | ||||||||
| DOI: | 10.1017/S0022109017000035 | ||||||||
| Status: | Peer Reviewed | ||||||||
| Publication Status: | Published | ||||||||
| Access rights to Published version: | Restricted or Subscription Access | ||||||||
| Date of first compliant deposit: | 16 December 2015 | ||||||||
| Date of first compliant Open Access: | 16 December 2015 | ||||||||
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