Skewness preferences and asset selection: An experimental study
AbstractIn this paper we experimentally test skewness preferences at the individual level. Several prospects that can be ordered with respect to the third-degree stochastic dominance (3SD) criterion are ranked by the participants of the experiment. We find that the skewness of a distribution has a significant impact on the decisions. Yet, while skewness has an impact, its direction differs substantially across subjects: 39% of our subjects act in accordance with skewness seeking and 10% seem to avoid skewness. On the level of individual decisions we find that the variance of the prospects and subjects' experience increases the probability of choosing the lottery with greater skewness.
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Bibliographic InfoPaper provided by Faculty of Economics and Statistics, University of Innsbruck in its series Working Papers with number 2009-13.
Date of creation: May 2009
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Skewness; Stochastic dominance; Decision-making under uncertainty;
Find related papers by JEL classification:
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-05-09 (All new papers)
- NEP-EXP-2009-05-09 (Experimental Economics)
- NEP-UPT-2009-05-09 (Utility Models & Prospect Theory)
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