Risk and Reward Preferences under Time Pressure

Financial decision making under time pressure, though ubiquitous, is poorly understood; classical and behavioral finance are silent about the time required for a decision to be made. In an experiment, calibrating allowable decision times to 1, 3, and 5 s, we find that classical moment-based preferences reflect time-invariant sensitivity to expected reward, purchase impulsiveness under extreme time pressure, and decreased aversion to variance and increased aversion to skewness with decision time. These timevarying sensitivities translate into increased probability distortions and decreased risk aversion for gains under prospect theory (PT). Strikingly, moment-based theory provides a better fit than PT.


Publié dans:
Review Of Finance, 18, 3, 999-1022
Année
2014
Publisher:
Oxford, Oxford Univ Press
ISSN:
1572-3097
Laboratoires:




 Notice créée le 2014-08-29, modifiée le 2018-12-03


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