Ambiguity Aversion and Household Portfolio Choice Puzzles

Ambiguity Aversion and Household Portfolio Choice Puzzles
Author: Stephen G. Dimmock
Publisher:
Total Pages: 66
Release: 2016
Genre:
ISBN:

We test the relation between ambiguity aversion and five household portfolio choice puzzles: non-participation in equities, low allocations to equity, home-bias, own-company stock ownership, and portfolio under-diversification. In a representative U.S. household survey, we measure ambiguity preferences using custom-designed questions based on Ellsberg urns. As theory predicts, ambiguity aversion is negatively associated with stock market participation, the fraction of financial assets in stocks, and foreign stock ownership, but it is positively related to own-company stock ownership. Conditional on stock ownership, ambiguity aversion is related to portfolio under-diversification, and during the financial crisis, ambiguity-averse respondents were more likely to sell stocks.

Ambiguity Aversion and Household Portfolio Choice

Ambiguity Aversion and Household Portfolio Choice
Author: Stephen G. Dimmock
Publisher:
Total Pages: 0
Release: 2013
Genre:
ISBN:

We test the relation between ambiguity aversion and five household portfolio choice puzzles: non- participation, low allocations to equity, home-bias, own-company stock ownership, and portfolio under- diversification. In a representative U.S. household survey, we measure ambiguity aversion using custom- designed questions based on Ellsberg urns. As theory predicts, ambiguity aversion is negatively associated with stock market participation, the fraction of financial assets in stocks, and foreign stock ownership, but positively related to own-company stock ownership. Conditional on stock ownership, ambiguity aversion is related to portfolio under-diversification, and during the financial crisis, ambiguity-averse respondents were more likely to sell stocks.

Household Financial Management

Household Financial Management
Author: Sumit Agarwal
Publisher: World Scientific
Total Pages: 322
Release: 2023-10-18
Genre: Business & Economics
ISBN: 9811267146

This book is dedicated to showcasing the importance of household financial management through the lens of academic research, with the goal of enhancing the financial well-being of individuals.Through an exploration of households' financial choices over their lifecycle, the book aims to provide a comprehensive understanding of households' financial decision-making processes, grounded in economic models, policies, and data.This holistic perspective encompasses an awareness of the functioning of different market types and an appreciation of various cognitive and behavioral biases. As a result, readers would be better positioned to make informed financial choices.By further integrating theories and empirical evidence from economics and finance, the book provides readers with insights into actions they can take to circumvent common financial pitfalls and offers solutions for effectively addressing them.Supplementary Material Resources:Resources are available to students who adopt this textbook for their courses. These include: (1) PowerPoint deck. Please contact [email protected].

Household Finance

Household Finance
Author: Richard Deaves
Publisher: Oxford University Press
Total Pages: 449
Release: 2024
Genre: Business & Economics
ISBN: 0197699855

"Household Finance: An Introduction to Individual Financial Behavior is about how individuals make financial decisions, and how these financial decisions contribute to and detract from their well-being. What sort of decisions am I talking about? We all must manage our money, shifting our resources across time. Sometimes we need to consume more than is currently available to us. For example, people commonly borrow to purchase residential real estate, paying down their mortgage loans over time. At other times, we have excess funds that we can save and invest. The main reason to accumulate wealth is to amass a fund that we can draw down when older and less able and willing to earn labor income. It is crucial, then, that our savings be sufficient to ensure a comfortable retirement. It is not enough to save; our savings must be invested appropriately so as to properly counterbalance risk and return. One way is to buy low-cost mutual funds or exchange-traded funds where the job of diversification is done for us. Some of us, however, purchase not only investment funds but also individual securities that we ourselves select. If so, it is vital that we avoid preventable errors. And, along the way, since the world is unpredictable, it is appropriate to protect ourselves by insuring against the sort of catastrophic loss that can derail our best-laid financial plans"--

The Foundations of Behavioral Economic Analysis

The Foundations of Behavioral Economic Analysis
Author: Sanjit Dhami
Publisher: Oxford University Press
Total Pages: 336
Release: 2019-02-14
Genre: Business & Economics
ISBN: 0192572547

This first volume of The Foundations of Behavioral Economic Analysis covers the opening topic found in this definitive introduction to the subject: the behavioral economics of risk, uncertainty, and ambiguity. It is an essential guide for advanced undergraduate and postgraduate students seeking a concise and focused text on this important subject, and examines how the decision maker chooses his optimal action in the presence of risk, uncertainty, and ambiguity. This updated extract from Dhami's leading textbook allows the reader to pursue subsections of this vast and rapidly growing field and to tailor their reading to their specific interests in behavioural economics.

Handbook of Experimental Finance

Handbook of Experimental Finance
Author: Füllbrunn, Sascha
Publisher: Edward Elgar Publishing
Total Pages: 451
Release: 2022-10-13
Genre: Business & Economics
ISBN: 1800372337

With an in-depth overview of the past, present and future of the field, The Handbook of Experimental Finance provides a comprehensive analysis of the current topics, methodologies, findings, and breakthroughs in research conducted with the help of experimental finance methodology. Leading experts suggest innovative ways of designing, implementing, analyzing, and interpreting finance experiments.

Mystery

Mystery
Author: Jonah Lehrer
Publisher: Simon and Schuster
Total Pages: 256
Release: 2022-08-09
Genre: Psychology
ISBN: 1501195883

New York Times bestselling author Jonah Lehrer “unravels the mystery of mysteries” in this “absolute delight” (Malcolm Gladwell) of a book that blends psychology, neuroscience, and anthropology to shine a new light on everything from the formulas of our favorite detective shows to the tricks of successful advertising campaigns and the calculated risks of the stock market. Why is mystery so compelling? What draws us to the unknown? Jonah Lehrer sets out to answer these questions in a vividly entertaining and surprisingly profound journey through the science of suspense. He finds that nothing can capture a person’s attention as strongly as mystery, and that mystery is the key principle in how humans view and understand the world. Whenever patterns are broken, we are hard-wired to find out why. Without our curiosity driving us to pursue new discoveries and solve stubborn problems, we would never have achieved the breakthroughs that have revolutionized human medicine, technology—and culture. From Shakespeare’s plays to the earliest works of the detective genre, our entertainment and media have continually reinvented successful forms of mystery to hook audiences. Here, Lehrer interviews individuals in unconventional fields—from dedicated small-business owners to innovative schoolteachers—who use mystery to challenge themselves and to motivate others to reach to new heights. He also examines the indelible role of mystery in our culture, revealing how the magical world of Harry Potter triggers the magic of dopamine in our brains, why the baseball season is ten times longer than the football season, and when the suspect is introduced in each episode of Law & Order. Fascinating, illuminating, and fun, Mystery explores the many surprising ways in which embracing a sense of awe and curiosity can enrich our lives.

Bounded Rationality

Bounded Rationality
Author: Sanjit Dhami
Publisher: MIT Press
Total Pages: 553
Release: 2022-07-12
Genre: Business & Economics
ISBN: 0262369656

Two leaders in the field explore the foundations of bounded rationality and its effects on choices by individuals, firms, and the government. Bounded rationality recognizes that human behavior departs from the perfect rationality assumed by neoclassical economics. In this book, Sanjit Dhami and Cass R. Sunstein explore the foundations of bounded rationality and consider the implications of this approach for public policy and law, in particular for questions about choice, welfare, and freedom. The authors, both recognized as experts in the field, cover a wide range of empirical findings and assess theoretical work that attempts to explain those findings. Their presentation is comprehensive, coherent, and lucid, with even the most technical material explained accessibly. They not only offer observations and commentary on the existing literature but also explore new insights, ideas, and connections. After examining the traditional neoclassical framework, which they refer to as the Bayesian rationality approach (BRA), and its empirical issues, Dhami and Sunstein offer a detailed account of bounded rationality and how it can be incorporated into the social and behavioral sciences. They also discuss a set of models of heuristics-based choice and the philosophical foundations of behavioral economics. Finally, they examine libertarian paternalism and its strategies of “nudges.”

Equity Home Bias in International Finance

Equity Home Bias in International Finance
Author: Kavous Ardalan
Publisher: Routledge
Total Pages: 243
Release: 2019-05-17
Genre: Business & Economics
ISBN: 1000001431

This book provides a comprehensive and critical analysis of research outcomes on the equity home bias puzzle – that people overinvest in domestic stocks relative to the theoretically optimal investment portfolio. It introduces place attachment – the bonding that occurs between individuals and their meaningful environments – as a new explanation for equity home bias, and presents a philosophically multi-paradigmatic view of place attachment. For the first time, a comprehensive and up-to-date review of the extant literature is provided, demonstrating that place attachment is a contributing factor to 22 different topics in which variations of home bias are present. The author also analyses the social-psychological underpinnings of place attachment, and considers the effect of multi-culturalism on the future of equity home bias. The book’s unique approach discusses the issues in conceptual terms rather than through data and statistical methods. This multi- and inter-disciplinary book is an invaluable resource for graduate students and researchers interested in economics, finance, philosophy, and/or methodology, introducing them to a new line of research.