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Is There a “Pessimisticâ€\x9D Bias in Individual Beliefs? Evidence from a Simple Survey

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  • Selima Mansour
  • Elyès Jouini

    ()

  • Clotilde Napp

    ()

Abstract

It is an important issue for economic and finance applications to determine whether individuals exhibit a behavioral bias toward pessimism in their beliefs, in a lottery or more generally in an investment opportunities framework. In this paper, we analyze the answers of a sample of 1,540 individuals to the following question “Imagine that a coin will be flipped 10 times. Each time, if heads, you win $$10\texttt{C}\!\!\!\rule[2.3pt]{.4em}{.3pt}\!\!\rule[3.3pt]{ .4em}{.3pt}$$ . How many times do you think that you will win?â€\x9D The average answer is surprisingly about 3.9 which is below the average 5, and we interpret this as a pessimistic bias. We find that women are more “pessimisticâ€\x9D than men, as are old people relative to young. We also analyze how our notion of pessimism is related to more general notions of pessimism previously introduced in psychology. Copyright Springer Science+Business Media, LLC 2006

Suggested Citation

  • Selima Mansour & Elyès Jouini & Clotilde Napp, 2006. "Is There a “Pessimisticâ€\x9D Bias in Individual Beliefs? Evidence from a Simple Survey," Theory and Decision, Springer, vol. 61(4), pages 345-362, December.
  • Handle: RePEc:kap:theord:v:61:y:2006:i:4:p:345-362
    DOI: 10.1007/s11238-006-9014-2
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    References listed on IDEAS

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    Cited by:

    1. Chatterjee, Swarn & Finke, Michael & Harness, Nathaniel, 2008. "Self-esteem and Individual Wealth," MPRA Paper 20120, University Library of Munich, Germany, revised 16 Aug 2008.
    2. repec:pal:compes:v:60:y:2018:i:1:d:10.1057_s41294-018-0053-9 is not listed on IDEAS
    3. Luc Arrondel, 2018. "Financial Literacy and Asset Behaviour: Poor Education and Zero for Conduct?," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 60(1), pages 144-160, March.
    4. Jouini, Elyès & Napp, Clotilde, 2015. "Gurus and belief manipulation," Economic Modelling, Elsevier, vol. 49(C), pages 11-18.
    5. Luc Arrondel & Jérôme Coffinet, 2018. "Demand For Stocks in the Crisis: France 2004-2014," PSE Working Papers halshs-01785324, HAL.
    6. Adrian Hillenbrand & Fabian Winter, 2017. "Volunteering under Population Uncertainty," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2017_12, Max Planck Institute for Research on Collective Goods.

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    Keywords

    judged probability; lottery; pessimism;

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