Investment under uncertainty: Testing the options model with professional traders
AbstractAn important class of investment decisions is characterized by unrecoverable sunk costs, resolution of uncertainty through time, and the ability to invest in the future as an alternative to investing today. The options model provides guidance in such settings, including an investment decision rule called the “bad news principle”: the downside investment state influences the investment decision whereas the upside investment state is ignored. This study takes a new approach to examining predictions of the options model by using the tools of experimental economics. Our evidence, which is drawn from student and professional trader subject pools, is broadly consonant with the options model.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by The Field Experiments Website in its series Artefactual Field Experiments with number 00053.
Date of creation: 2010
Date of revision:
Contact details of provider:
Web page: http://www.fieldexperiments.com
Other versions of this item:
- John A. List & Michael S. Haigh, 2010. "Investment Under Uncertainty: Testing the Options Model with Professional Traders," The Review of Economics and Statistics, MIT Press, vol. 92(4), pages 974-984, November.
- John A. List & Michael S. Haigh, 2010. "Investment under Uncertainty: Testing the Options Model with Professional Traders," NBER Working Papers 16038, National Bureau of Economic Research, Inc.
- C9 - Mathematical and Quantitative Methods - - Design of Experiments
- C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
- D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Gneezy, U. & Potters, J.J.M., 1997.
"An experiment on risk taking and evaluation periods,"
Open Access publications from Tilburg University
urn:nbn:nl:ui:12-73908, Tilburg University.
- Gneezy, Uri & Potters, Jan, 1997. "An Experiment on Risk Taking and Evaluation Periods," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 631-45, May.
- Gneezy, U. & Potters, J.J.M., 1996. "An experiment on risk taking and evaluation periods," Discussion Paper 1996-61, Tilburg University, Center for Economic Research.
- Locke, Peter R. & Mann, Steven C., 2005. "Professional trader discipline and trade disposition," Journal of Financial Economics, Elsevier, vol. 76(2), pages 401-444, May.
- Robert E. Lucas & Jr., 1967. "Adjustment Costs and the Theory of Supply," Journal of Political Economy, University of Chicago Press, vol. 75, pages 321.
- Ryan Kellogg, 2010. "The Effect of Uncertainty on Investment: Evidence from Texas Oil Drilling," NBER Working Papers 16541, National Bureau of Economic Research, Inc.
- Al-Ubaydli, Omar & Boettke, Peter, 2010.
"Markets as economizers of information: Field experimental examination of the “Hayek Hypothesis”,"
27660, University Library of Munich, Germany.
- Omar Al-Ubaydli & Peter Boettke, 2011. "Markets as Economizers of Information: Field Experimental Examination of the "Hayek Hypothesis"," Working Papers 1025, George Mason University, Interdisciplinary Center for Economic Science.
- Omar Al-Ubaydli & Peter Boettke, 2012. "Markets as economizers of information: Field experimental examination of the 'hayek hypothesis'," Framed Field Experiments 00195, The Field Experiments Website.
- Pütz, Alexander & Ruenzi, Stefan, 2010. "Overconfidence among professional investors: Evidence from mutual fund managers," CFR Working Papers 08-08 [rev.], University of Cologne, Centre for Financial Research (CFR).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joe Seidel).
If references are entirely missing, you can add them using this form.