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Individual attitudes and market dynamics towards imprecision

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  • Huber, Christoph

    (Aalto University School of Business)

  • Rose, Julia Elisabeth

    (Erasmus University Rotterdam)

Abstract

We analyze decisions and market outcomes under imprecision---that is, situations in which the probabilities or outcomes of a prospect are not precisely known. In a laboratory experiment with 320 participants, we model these two dimensions of imprecision and analyze individual attitudes and market dynamics. On average, we find participants to exhibit neutrality towards imprecision in probabilities but a preference for imprecision in outcome realizations. Our results demonstrate that individual attitudes broadly translate into the market outcomes and are correlated with individual trading activity. Our findings are relevant for managing the uncertainties involved in many financial decisions and policy-making applications.

Suggested Citation

  • Huber, Christoph & Rose, Julia Elisabeth, 2020. "Individual attitudes and market dynamics towards imprecision," OSF Preprints bw8fc_v1, Center for Open Science.
    • Handle: RePEc:osf:osfxxx:bw8fc_v1
    DOI: 10.31219/osf.io/bw8fc_v1
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