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Local Thinking and Skewness Preferences

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  • Dertwinkel-Kalt, Markus
  • Köster, Mats

Abstract

We show that models of stimulus-driven attention can account for skewness preferences. As unlikely, but outstanding payoffs attract attention, an agent exhibits a preference for right-skewed and an aversion toward left-skewed risks. We show that extreme predictions on skewness preferences by prospect theory can be ruled out for models of stimulus-driven attention.

Suggested Citation

  • Dertwinkel-Kalt, Markus & Köster, Mats, 2017. "Local Thinking and Skewness Preferences," VfS Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168303, Verein für Socialpolitik / German Economic Association.
  • Handle: RePEc:zbw:vfsc17:168303
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    Cited by:

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    2. Adrian Bruhin & Maha Manai & Luís Santos-Pinto, 2022. "Risk and rationality: The relative importance of probability weighting and choice set dependence," Journal of Risk and Uncertainty, Springer, vol. 65(2), pages 139-184, October.
    3. Adrian Bruhin & Maha Manai & Luis Santos-Pinto, 2019. "Risk and Rationality:The Relative Importance of Probability Weighting and Choice Set Dependence," Cahiers de Recherches Economiques du Département d'économie 19.01new, Université de Lausanne, Faculté des HEC, Département d’économie.
    4. Ebert, Sebastian & Hilpert, Christian, 2019. "Skewness preference and the popularity of technical analysis," Journal of Banking & Finance, Elsevier, vol. 109(C).

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    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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