Valuing bets and hedges: Implications for the construct of risk preference
Journal Title: Judgment and Decision Making - Year 2018, Vol 13, Issue 6
Abstract
Risk attitudes implied by valuations of risk-increasing assets depart markedly from those implied by valuations of risk-reducing assets. For instance, many are unwilling to pay the expected value for a risky asset or for its perfect hedge. Although nearly every theory of risk preference (and logic) demands a negative correlation between valuations of bets and hedges, we observe positive correlations. This inconsistency is difficult to expunge.
Authors and Affiliations
Shane Frederick, Amanda Levis, Steven Malliaris and Andrew Meyer
Keywords
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