Evolution of Subjective Hurricane Risk Perceptions: A Bayesian Approach
This 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.
|Date of creation:||27 Feb 2009|
|Publication status:||Forthcoming: Under Review|
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Web page: http://www.bus.miami.edu/faculty-and-research/academic-departments/economics/index.html
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