RISKY CHOICES IN A RISK-TAKING EXPERIMENT: ARE SINGAPOREANS DIFFERENT FROM THE REST OF THE WORLD?

2013 ◽  
Vol 58 (03) ◽  
pp. 1350015
Author(s):  
ROLAND CHEO
Keyword(s):  
Risk Taking ◽  
Reference Group ◽  
Status Quo ◽  
Exchange Students ◽  
Risk Seeking ◽  
Risk Neutral ◽  
Seeking Behavior ◽  
Expected Payoffs ◽  
Gains And Losses ◽  
Chinese Undergraduates

This paper introduces a rich experimental environment which allows one to control for possible status quo effects as well as the "anticipatory fear of loss" inherent in gambles by framing scenarios in terms of gains and losses. A total of 162 undergraduates — Africans, Caucasians, Singaporeans and Chinese — are recruited for this study. From the risk choices that students take, we can see how Singaporeans differ from their counterparts elsewhere. The results show that Singaporeans are less risk averse than African or Caucasian exchange students. In terms of risk seeking behavior, when using Caucasians as a reference group, Singaporeans and Chinese undergraduates are also relatively more risk seeking as well. The majority of the players are risk neutral in this experiment. Singaporeans, like the Caucasians and Chinese in the sample, are all more likely to favor risk neutral strategies if their default gamble is one with higher expected payoffs.

Contingent gains and losses in a risk taking situation

1964 ◽  
Author(s):  
Jerome L. Myers ◽  
Mary M. Suydam ◽  
Blase Gambino
Keyword(s):  
Risk Taking ◽  
Gains And Losses

Respondents in Asian Cultures (e.g., Chinese) are More Risk-Seeking and More Overconfident than Respondents in Other Cultures (e.g., in United States) but the Reciprocal Predictions are in Total Opposition: How and Why?

2004 ◽  
Vol 4 (2) ◽  
pp. 263-292 ◽  
Author(s):  
Shu Li ◽  
Yongqing Fang
Keyword(s):  
United States ◽  
Social Network ◽  
Risk Taking ◽  
Risk Preferences ◽  
Risk Preference ◽  
Cross Cultural ◽  
Cultural Variations ◽  
Risk Seeking ◽  
The Social ◽  
Predicted Risk

AbstractTriggered by rather surprising findings that respondents in Asian cultures (e.g., Chinese) are more risk-seeking and more overconfident than respondents in other cultures (e.g., in United States) and that the reciprocal predictions are in total opposition, four experiments were designed to extend previous collective-culture oriented researches. Results revealed that (1) Singapore 21, which is a vision of Singapore in the 21st century and has highlighted the promotion of a collective culture, did not advocate greater risk-seeking but led to weaker overconfidence; (2) the knowledge of "financial help from social network" did not permit prediction of risk preference but the knowledge of "the value difference between possible outcomes" did; (3) the social network could be viewed not only as a positive "cushion" but also as a negative "burden" in both gain and loss domains of risky choices; (4) the predictions of the risk-as-value, risk-as-feelings and stereotype hypotheses were not consistent with the predicted risk preferences of others but the predictions of the economic-performance hypothesis were consistent with the predicted risk preferences as well as the predicted overconfidence of others. The implications for cross-cultural variations in overconfidence and for cross-cultural variations in risk-taking were discussed.

Salience and Mutual Fund Investor Demand for Idiosyncratic Volatility

2020 ◽  
Author(s):  
Christopher P. Clifford ◽  
Jon A. Fulkerson ◽  
Russell Jame ◽  
Bradford D. Jordan
Keyword(s):  
Experimental Evidence ◽  
Mutual Funds ◽  
Mutual Fund ◽  
Idiosyncratic Volatility ◽  
Investor Attention ◽  
Risk Seeking ◽  
Retail Investors ◽  
Seeking Behavior ◽  
Extreme Returns

We find that mutual fund investors are more likely to both purchase and redeem funds with high idiosyncratic volatility (IV). Investors’ tendency to purchase high IV funds is largely driven by high IV funds having more extreme returns, which increases the salience of the fund. Including flexible controls for extreme past returns over multiple horizons decreases the effect of IV on new investment, and experimental evidence corroborates that increasing the salience of extreme returns increases investor demand for IV. Demand for IV is higher among retail investors and funds with otherwise lower salience. Collectively, the evidence suggests that extreme returns attract investor attention and contribute to investors’ risk seeking behavior when purchasing mutual funds. This paper was accepted by David Simchi-Levi, finance.

scholarly journals The Nash Solution as a von Neumann–Morgenstern Utility Function on Bargaining Games

2020 ◽  
Vol 37 (1-2) ◽  
pp. 87-104
Author(s):  
Anke Gerber
Keyword(s):  
Utility Function ◽  
Status Quo ◽  
Nash Solution ◽  
Bargaining Games ◽  
Von Neumann ◽  
Risk Neutral ◽  
The Nash Solution

AbstractIn this paper we prove that the symmetric Nash solution is a risk neutral von Neumann–Morgenstern utility function on the class of pure bargaining games. Our result corrects an error in Roth (Econometrica 46:587–594, 983, 1978) and generalizes Roth’s result to bargaining games with arbitrary status quo.

Nitrogen-Fixing Winter Cover Crops and Production Risk: A Case Study for No-Tillage Corn

1998 ◽  
Vol 30 (1) ◽  
pp. 163-174 ◽  
Author(s):  
James A. Larson ◽  
Roland K. Roberts ◽  
Donald D. Tyler ◽  
Bob N. Duck ◽  
Stephen P. Slinsky
Keyword(s):  
Cover Crops ◽  
Stochastic Dominance ◽  
Nitrogen Fertilization ◽  
Risk Averse ◽  
Production Risk ◽  
Risk Seeking ◽  
Wide Range ◽  
Seeking Behavior ◽  
Net Revenue ◽  
Applied Nitrogen

AbstractWinter legumes can substitute for applied nitrogen fertilization of corn. Stochastic dominance was used to order net revenues from legume and applied nitrogen alternatives. Stochastic dominance orderings indicate that systems combining vetch with low applied nitrogen fertilization (50 and 100 pounds/acre, respectively) were risk inefficient. By contrast, vetch and 150 pounds/acre applied nitrogen maximized expected net revenue and was risk efficient for a wide range of risk-averse and risk-seeking behavior. Farmers with these risk attitudes may not reduce applied nitrogen if they switch to a vetch cover. Extremely risk-averse or risk-seeking farmers would not prefer winter legumes.

STOCHASTIC DOMINANCE AND BEHAVIOR TOWARDS RISK: THE MARKET FOR ISHARES

2012 ◽  
Vol 07 (01) ◽  
pp. 1250005 ◽  
Author(s):  
DOMINIC GASBARRO ◽  
WING-KEUNG WONG ◽  
J. KENTON ZUMWALT
Keyword(s):  
Stochastic Dominance ◽  
Utility Functions ◽  
Investor Behavior ◽  
Risk Averse ◽  
Risk Seeking ◽  
Bull Markets ◽  
Seeking Behavior ◽  
Return Distributions ◽  
And Behavior ◽  
Positive Return

Prospect theory suggests that risk seeking can occur when investors face losses and thus an S-shaped utility function can be useful in explaining investor behavior. Using stochastic dominance procedures, Post and Levy (2015) find evidence of reverse S-shaped utility functions. This is consistent with investors exhibiting risk-seeking tendencies in bull markets and risk aversion in bear markets. We use both ascending and descending stochastic dominance procedures to test for risk-averse and risk-seeking behavior. By partitioning iShares' return distributions into negative and positive return regions, we find evidence of all four utility functions: concave, convex, S-shaped and reverse S-shaped.

scholarly journals User Equilibrium Analysis Considering Travelers’ Context-Dependent Route Choice Behavior on the Risky Traffic Network

2020 ◽  
Vol 12 (17) ◽  
pp. 6706
Author(s):  
Qinghui Xu ◽  
Xiangfeng Ji
Keyword(s):  
High Probability ◽  
Choice Behavior ◽  
Route Choice ◽  
User Equilibrium ◽  
Equilibrium Analysis ◽  
Risk Averse ◽  
Risk Seeking ◽  
Route Choice Behavior ◽  
Risk Neutral ◽  
Context Dependent

This paper studies travelers’ context-dependent route choice behavior in a risky trafficnetwork from a long-term perspective, focusing on the effect of travelers’ salience characteristics. In particular, a flow-dependent salience theory is proposed for this analysis, where the flow denotes the traffic flow on the risky route. In the proposed model, travelers’ attention is drawn to the salient travel utility, and the objective probabilities of the state of the world are replaced by the decision weights distorted in favor of this salient travel utility. A long-run user equilibrium will be achieved when no traveler can improve his or her salient travel utility by unilaterally changing routes, termed salient user equilibrium, which extends the scope of the Wardropian user equilibrium. Furthermore, we prove the existence and uniqueness of this salient user equilibrium. Finally, numerical studies demonstrate our theoretical findings. The equilibrium results show non-intuitive insights into travelers’ route choice behavior. (1) Travelers can be risk-seeking (the travel utility of a risky route is small with a relatively high probability), risk-neutral (in special situations), or risk-averse (the travel utility of a risky route is large with a relatively high probability), which depends on the salient state. (2) The extent of travelers’ risk-seeking or risk-averse behavior depends on their extent of salience bias, while the risk-neutral behavior is irrelative to this salience bias.

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