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Opportunity costs in buying and short selling--Do they really matter?

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  • Shavit, Tal
  • Rosenboim, Mosi
  • Malul, Miki

Abstract

The experimental results of the paper reveal that people do not take into consideration opportunity costs or opportunity profits when buying and short selling lottery tickets. These results are inconsistent with basic economic and finance theories.

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File URL: http://www.sciencedirect.com/science/article/pii/S0165176511001194
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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 112 (2011)
Issue (Month): 1 (July)
Pages: 122-124

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Handle: RePEc:eee:ecolet:v:112:y:2011:i:1:p:122-124

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Web page: http://www.elsevier.com/locate/ecolet

Related research

Keywords: Opportunity cost Short selling Auction Experiment;

References

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  1. Shogren, Jason F. & Cho, Sungwon & Koo, Cannon & List, John & Park, Changwon & Polo, Pablo & Wilhelmi, Robert, 2001. "Auction mechanisms and the measurement of WTP and WTA," Resource and Energy Economics, Elsevier, vol. 23(2), pages 97-109, April.
  2. Shane Frederick & Nathan Novemsky & Jing Wang & Ravi Dhar & Stephen Nowlis, 2009. "Opportunity Cost Neglect," Journal of Consumer Research, University of Chicago Press, vol. 36(4), pages 553-561, December.
  3. Richard H. Thaler & Eric J. Johnson, 1990. "Gambling with the House Money and Trying to Break Even: The Effects of Prior Outcomes on Risky Choice," Management Science, INFORMS, vol. 36(6), pages 643-660, June.
  4. Alvin E. Roth & Axel Ockenfels, 2002. "Last-Minute Bidding and the Rules for Ending Second-Price Auctions: Evidence from eBay and Amazon Auctions on the Internet," American Economic Review, American Economic Association, vol. 92(4), pages 1093-1103, September.
  5. Ernan Haruvy & Charles N. Noussair, 2006. "The Effect of Short Selling on Bubbles and Crashes in Experimental Spot Asset Markets," Journal of Finance, American Finance Association, vol. 61(3), pages 1119-1157, 06.
  6. William Vickrey, 1961. "Counterspeculation, Auctions, And Competitive Sealed Tenders," Journal of Finance, American Finance Association, vol. 16(1), pages 8-37, 03.
  7. Eisenberger, Roselies & Weber, Martin, 1995. "Willingness-to-Pay and Willingness-to-Accept for Risky and Ambiguous Lotteries," Journal of Risk and Uncertainty, Springer, vol. 10(3), pages 223-33, May.
  8. Mosi Rosenboim & Tal Shavit, 2012. "Whose money is it anyway? Using prepaid incentives in experimental economics to create a natural environment," Experimental Economics, Springer, vol. 15(1), pages 145-157, March.
  9. Northcraft, Gregory B. & Neale, Margaret A., 1986. "Opportunity costs and the framing of resource allocation decisions," Organizational Behavior and Human Decision Processes, Elsevier, vol. 37(3), pages 348-356, June.
  10. William F. Sharpe, 1964. "Capital Asset Prices: A Theory Of Market Equilibrium Under Conditions Of Risk," Journal of Finance, American Finance Association, vol. 19(3), pages 425-442, 09.
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