Stability of Choices Among Uncertain Alternatives

McGlothlin, William H.

doi:10.1142/9789812819192_0004

Cited by 19 publications

(28 citation statements)

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“…McGlothlin (1956) pursues a similar approach to Griffith (1949) and reaches the same conclusion using data from 9,248 California horse races. He further identifies changes in behavior over the course of a day's races that he takes to be inconsistent with the EU model.…”

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confidence: 62%

Estimating Risk Preferences in the Field

Barseghyan

Molinari

O’Donoghue

et al. 2018

Journal of Economic Literature

112

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We survey the literature on estimating risk preferences using field data. We concentrate our attention on studies in which risk preferences are the focal object and estimating their structure is the core enterprise. We review a number of models of risk preferences—including both expected utility (EU) theory and non-EU models—that have been estimated using field data, and we highlight issues related to identification and estimation of such models using field data. We then survey the literature, giving separate treatment to research that uses individual-level data (e.g., property-insurance data) and research that uses aggregate data (e.g., betting-market data). We conclude by discussing directions for future research. ( JEL C51, D11, D81, D82, D83, G22, I13)

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confidence: 62%

Estimating Risk Preferences in the Field

Barseghyan

Molinari

O’Donoghue

et al. 2018

Journal of Economic Literature

112

View full text Add to dashboard Cite

show abstract

“…Well-known examples are the favorite long-shot bias (Hausch et al 1981, McGlothlin 1956), or the house money effect (Thaler and Johnson 1990). El-Sehity et al (forthcoming) investigate the time constancy of binary lottery choices and certainty equivalents by comparing individual risk attitude at the time the experiment was conducted to four weeks later when subjects obtained their payoff.…”

Section: Related Literaturementioning

confidence: 99%

Risk attitude and market behavior: Evidence from experimental asset markets

Fellner

Maciejovsky

2007

Journal of Economic Psychology

205

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“…Decision makers are assumed to be less sensitive to changes in outcomes further away from this reference point, which is called diminishing sensitivity, and it is assumed that negative changes (losses) hurt more than positive changes (gains), a phenomenon called loss aversion. This generalization helps to explain phenomena such as the equity premium puzzle (Benartzy and Thaler 1995), downward-sloping labor supply (Goette et al 2004), the End-of-the-day-Effect in horse race betting (McGlothlin 1956), and the co-existence of appreciable small stake-and moderate large stake-risk aversion (Rabin 2000). Furthermore, linearity in probability is replaced by a subjective probability weighting function that is assumed to have an inverse-S shape, reflecting increased sensitivity toward changes in probabilities near 0 and 1.…”

Section: Introductionmentioning

confidence: 99%

A parametric analysis of prospect theory’s functionals for the general population

2009

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This article presents the results of an experiment that completely measures the utility function and probability weighting function for different positive and negative monetary outcomes, using a representative sample of N = 1,935 from the general public. The results confirm earlier findings in the lab, suggesting that utility is less pronounced than what is found in classical measurements where expected utility is assumed. Utility for losses is found to be convex, consistent with diminishing sensitivity, and the obtained loss-aversion coefficient of 1.6 is moderate but in agreement with contemporary evidence. The estimated probability weighting functions have an inverse-S shape and they imply pessimism in both domains. These results show that probability weighting is also an important phenomenon in the general population. Women and lower educated individuals are found to be more risk averse, in agreement with common findings. In contrast to previous studies that ascribed gender differences in risk attitudes solely to differences in the degree utility curvature, however, our results show that this finding is primarily driven by loss aversion and, for women, also by a more pessimistic psychological response toward the probability of obtaining the best possible outcome.

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Stability of Choices Among Uncertain Alternatives

Cited by 19 publications

References 0 publications

Estimating Risk Preferences in the Field

Estimating Risk Preferences in the Field

Risk attitude and market behavior: Evidence from experimental asset markets

A parametric analysis of prospect theory’s functionals for the general population

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