Evolution of Subjective Hurricane Risk Perceptions: A Bayesian Approach
AbstractThis paper studies how individuals update subjective risk perceptions in response to hurricane track forecast information, using a unique data set from an event market, the Hurricane Futures Market (HFM). We derive a theoretical Bayesian framework which predicts how traders update their perceptions of the probability of a hurricane making landfall in a certain range of coastline. Our results suggest that traders behave in a way consistent with Bayesian updating but this behavior is based on the perceived quality of the information received.
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Bibliographic InfoPaper provided by University of Miami, Department of Economics in its series Working Papers with number 0905.
Length: 42 pages
Date of creation: 27 Feb 2009
Date of revision:
Publication status: Forthcoming: Under Review
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Web page: http://www.bus.miami.edu/faculty-and-research/academic-departments/economics/index.html
More information through EDIRC
risk perceptions; learning; Bayesian learning; event markets; prediction markets; favorite-longshot bias; hurricanes;
Other versions of this item:
- Kelly, David L. & Letson, David & Nelson, Forrest & Nolan, David S. & Solís, Daniel, 2012. "Evolution of subjective hurricane risk perceptions: A Bayesian approach," Journal of Economic Behavior & Organization, Elsevier, vol. 81(2), pages 644-663.
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
- C9 - Mathematical and Quantitative Methods - - Design of Experiments
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