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Biased Bayesian Learning with an Application to the Risk-Free Rate Puzzle

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  • Alexander Ludwig
  • Alexander Zimper

Abstract

Based on the axiomatic framework of Choquet decision theory, we develop a closed-form model of Bayesian learning with ambiguous beliefs about the mean of a normal distribution. In contrast to rational models of Bayesian learning the resulting Choquet Bayesian estimator results in a long-run bias that reflects the agent’s ambiguity attitudes. By calibrating the standard […]

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  • Alexander Ludwig & Alexander Zimper, 2013. "Biased Bayesian Learning with an Application to the Risk-Free Rate Puzzle," Working Papers 390, Economic Research Southern Africa.
    • Handle: RePEc:rza:wpaper:390
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    Cited by:

    1. Alexander Zimper & Wei Ma, 2017. "Bayesian learning with multiple priors and nonvanishing ambiguity," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 64(3), pages 409-447, October.
    2. Alexander Ludwig & Alexander Zimper, 2013. "A decision-theoretic model of asset-price underreaction and overreaction to dividend news," Annals of Finance, Springer, vol. 9(4), pages 625-665, November.
    3. Craig Webb, 2015. "Piecewise additivity for non-expected utility," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 60(2), pages 371-392, October.
    4. Albrecht, E & Baum, Günter & Birsa, R & Bradamante, F & Bressan, A & Chapiro, A & Cicuttin, A & Ciliberti, P & Colavita, A & Costa, S & Crespo, M & Cristaudo, P & Dalla Torre, S & Diaz, V & Duic, V &, 2010. "Results from COMPASS RICH-1," Center for Mathematical Economics Working Papers 535, Center for Mathematical Economics, Bielefeld University.
    5. Craig S. Webb, 2017. "Piecewise linear rank-dependent utility," Theory and Decision, Springer, vol. 82(3), pages 403-414, March.
    6. Alexander Zimper, 2011. "Do Bayesians Learn Their Way Out of Ambiguity?," Decision Analysis, INFORMS, vol. 8(4), pages 269-285, December.

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    More about this item

    Keywords

    Bayesian analysis; Quantitative Methods; Research Methods; Risk and Uncertainty;
    All these keywords.

    JEL classification:

    • C79 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Other
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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