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Do individual attitudes towards imprecision survive in experimental asset markets?

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  • Huber, Christoph

    (University of Innsbruck)

  • Rose, Julia

Abstract

In situations where both the magnitude of gains and losses as well as the probability distribution over these realizations is uncertain, imprecision is an inherent feature of decision-making. While imprecision has been shown to affect individual valuations, many decisions are made in market settings with potentially different implications. We thus examine the impact of imprecision, first, in an individual decision task, and second, in experimental asset markets—with no imprecision (risk), imprecision in probabilities (ambiguity), imprecision in outcomes, and full imprecision. We find imprecision seeking in outcomes in people’s individual attitudes, but these preferences do not withstand market dynamics. Nevertheless, we observe imprecision aversion in probabilities at the end of trading, suggesting that ambiguity aversion, in contrast, prevails in experimental markets.

Suggested Citation

  • Huber, Christoph & Rose, Julia, 2020. "Do individual attitudes towards imprecision survive in experimental asset markets?," OSF Preprints bw8fc, Center for Open Science.
    • Handle: RePEc:osf:osfxxx:bw8fc
    DOI: 10.31219/osf.io/bw8fc
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    More about this item

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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