We examine a fundamental feature of choice under uncertainty: Overestimating an alternative makes one more likely to choose it. If people are naive to this structural feature, then they will tend to have erroneously inflated expectations for the alternatives they choose. In contrast to theories of motivated reasoning, this theory suggests that individuals will overestimate chosen alternatives even before they make their choice. In four studies, we found that students and managers exhibited behavior consistent with naïveté toward this relationship between estimation error and choice, leaving them overoptimistic about their chosen alternatives. This overoptimism from choosing positive error is exacerbated when the true values of the alternatives are close together, when there is more uncertainty about the values of alternatives, and when there are many alternatives to choose from. Our results illustrate how readily overoptimism emerges as a result of statistical naïveté, even in the absence of a desire to justify one's decision after the choice.
We document the implementation of the Insurer Climate Risk Disclosure Survey in the United States and provide an overview of its historical development since 2009. By 2020, the Survey is mandatory in 15 states or jurisdictions for insurers that meet the premium threshold. We find that the coverage of the Survey has reached 80% of Property & Liability premiums and close to 100% of life premiums, but the majority of US insurers-especially small or less diversified insurers who are most vulnerable to climate risk-are not covered by this survey. We highlight research opportunities exploiting the unique institutional setting of the Survey while also documenting the caveats of the Survey.
| INTRODUCTIONClimate-related risk disclosure is becoming more widespread against a backdrop of increasing focus on climate change by the public. In addition to voluntary disclosure initiatives such as the Carbon Disclosure Project and the Task Force on Climate-Related Financial Disclosures (TCFD), government-mandated disclosures are also taking place in the UK, France, Hong Kong, and New Zealand. These disclosure initiatives or mandates cover public firms, financial institutions, or both. In the United States, the Securities and Exchange Commission (SEC) set forth proposed rules for climate-related disclosures by public firms in March 2022. 1 The proposed rules have drawn thousands of public comments and resulted in intense debates on the extent to which mandatory climate risk disclosure can benefit investors or impose undue
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.