Wishful thinking

Mayraz, Guy (2011) Wishful thinking. CEP Discussion Papers (CEPDP1092). London School of Economics and Political Science. Centre for Economic Performance, London, UK.

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Abstract

An experiment tested whether and in what circumstances people are more likely to believe an event simply because it makes them better off. Subjects observed a financial asset's historical price chart, and received both an accuracy bonus for predicting the price at some future point, and an unconditional award that was either increasing or decreasing in this price. Despite incentives for hedging, subjects gaining from high prices made significantly higher predictions than those gaining from low prices. The magnitude of the bias was smaller in charts with less subjective uncertainty, but was independent of the amount paid for accurate predictions.

Item Type:	Monograph (Discussion Paper)
Official URL:	https://cep.lse.ac.uk/_new/publications/discussion...
Additional Information:	© 2011 The Author(s)
Divisions:	LSE
Subjects:	H Social Sciences > HC Economic History and Conditions
JEL classification:	D - Microeconomics > D0 - General > D01 - Microeconomic Behavior: Underlying Principles D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D81 - Criteria for Decision-Making under Risk and Uncertainty D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D84 - Expectations; Speculations G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice; Investment Decisions
Date Deposited:	20 Feb 2024 14:45
Last Modified:	11 Dec 2024 19:53
URI:	http://eprints.lse.ac.uk/id/eprint/121942

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