Article (Scientific journals)
Individual Choice from a Convex Lottery Set: Experimental Evidence
Neugebauer, Tibor
2008In Mohammed Abdellaboui and John D Hey (eds), Advances in Decision Making under Risk and Uncertainty, Theory and Decision Library C. Berlin: Springer, 42, p. 121-135
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Keywords :
individual choice under risk; first order stochastic dominance; modern; portfolio theory; prospect theory
Abstract :
[en] This article reports on simple individual choice experiments, in which subjects choose a lottery from a convex set involving dominated lotteries and perfect negative correlation between risky assets. All subjects’ choices obey to [violate] the dominance criterion when dominance is [not] transparent. Choices involve too much risk since subjects overlook covariances. The main result is that elicited preferences suggest a two-step boundedly rational diversification pattern: subjects allocate a share of their endowment risklessly and allocate the remainder extremely risky but losslessly. This pattern is in line with safety first theory and loss aversion theory, but contradicts both in choice.
Disciplines :
General economics & history of economic thought
Identifiers :
UNILU:UL-ARTICLE-2009-148
Author, co-author :
Neugebauer, Tibor  ;  University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Luxembourg School of Finance (LSF)
External co-authors :
no
Language :
English
Title :
Individual Choice from a Convex Lottery Set: Experimental Evidence
Publication date :
2008
Journal title :
Mohammed Abdellaboui and John D Hey (eds), Advances in Decision Making under Risk and Uncertainty, Theory and Decision Library C. Berlin: Springer
ISSN :
0924-6126
Publisher :
C. Berlin: Springer
Volume :
42
Pages :
121-135
Peer reviewed :
Peer reviewed
Available on ORBilu :
since 05 January 2022

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