infonet-economy

Comments on the article by E. Brandstätter, G. Gigerenzer, and R. Hertwig. The authors discuss the priority heuristic, a recent model for decisions under risk. They reanalyze the experimental validity of this approach and discuss how these results compare with cumulative prospect theory, the currently most established model in behavioral economics. They also discuss how general…

Ratios of quadratic forms in correlated normal variables which introduce noncentrality into the quadratic forms are considered. The denominator is assumed to be positive (with probability 1). Various serial correlation estimates such as least-squares, Yule–Walker and Burg, as well as Durbin–Watson statistics, provide important examples of such ratios. The cumulative distribution…

Applied researchers often test for the difference of the Sharpe ratios of two investmentnstrategies. A very popular tool to this end is the test of Jobson and Korkie (1981), whichnhas been corrected by Memmel (2003). Unfortunately, this test is not valid when returnsnhave tails heavier than the normal distribution or are of time series nature. Instead, wenpropose the use of robust…

Empirical studies show that people tend to be overconfident about the precision of their knowledge, leading to miscalibration. Consistent with this, we found that on overage the decision makers of Swiss pension plans provide too narrow confidence intervals when asked to estimate the past return of various assets. Their confidence intervals are also systematically too narrow in their…

Two experiments were designed to explore the existence of systematic differences in risk perceptions and risk attitudes between Chinese and US participants. The first experiment involved ranking monetary lotteries using measures of perceived riskiness and willingness to pay (WTP). Several simple heuristics were evaluated to predict perceived riskiness and WTP. Using WTP responses,…

Integrated choice and latent variable (ICLV) models represent a promising new class of models which merge classic choice models with the structural equation approach (SEM) for latent variables. Despite their conceptual appeal, applications of ICLV models in marketing remain rare. We extend previous ICLV applications by first estimating a multinomial choice model and, second, by…