Lower Levels of Directed Exploration and Reflective Thinking Are Associated With Greater Anxiety and Depression

Anxiety and depression are often associated with strong beliefs that entering specific situations will lead to aversive outcomes – even when these situations are objectively safe and avoiding them reduces well-being. A possible mechanism underlying this maladaptive avoidance behavior is a failure to reflect on: (1) appropriate levels of uncertainty about the situation, and (2) how this uncertainty could be reduced by seeking further information (i.e., exploration). To test this hypothesis, we asked a community sample of 416 individuals to complete measures of reflective cognition, exploration, and symptoms of anxiety and depression. Consistent with our hypotheses, we found significant associations between each of these measures in expected directions (i.e., positive relationships between reflective cognition and strategic information-seeking behavior or “directed exploration”, and negative relationships between these measures and anxiety/depression symptoms). Further analyses suggested that the relationship between directed exploration and depression/anxiety was due in part to an ambiguity aversion promoting exploration in conditions where information-seeking was not beneficial (as opposed to only being due to under-exploration when more information would aid future choices). In contrast, reflectiveness was associated with greater exploration in appropriate settings and separately accounted for differences in reaction times, decision noise, and choice accuracy in expected directions. These results shed light on the mechanisms underlying information-seeking behavior and how they may contribute to symptoms of emotional disorders. They also highlight the potential clinical relevance of individual differences in reflectiveness and exploration and should motivate future research on their possible contributions to vulnerability and/or maintenance of affective disorders.

The Australian Twins Economic Preferences Survey

This article describes the Australian Twins Economic Preferences Survey (ATEPS). The data set comprises a wide variety of preference and behavioral measures (risk aversion, impatience, ambiguity aversion, trust, confidence) elicited using incentivized decision tasks. One-thousand one-hundred twenty Australian adult twins (560 pairs) completed the survey, making it one of the largest data sets containing incentivized preference measures of twins. As the survey was conducted during the COVID-19 pandemic, we also collected information on experiences related to the pandemic, along with a variety of questions on political attitudes and mental wellbeing. We hope that ATEPS can make a valuable contribution to social science and genetics research.

Ambiguity aversion: bibliometric analysis and literature review of the last 60 years

We conduct a bibliometric analysis and review the literature of the last six decades on ambiguity aversion. Comparing trends in theoretical, experimental, and empirical contributions, our study presents the main aspects that are discussed in this literature. We show the increasing relevance of ambiguity aversion for decision-making research and discuss factors influencing attitudes on ambiguity. Our literature review reveals unsolved problems in the research on ambiguity and gives an outlook on new ventures for future research.

Insurance decisions under nonperformance risk and ambiguity

An important societal problem is that people underinsure against risks that are unlikely or occur in the far future, such as natural disasters and long-term care needs. One explanation is that uncertainty about the risk of non-reimbursement induces ambiguity averse and risk prudent decision makers to take out less insurance. We set up an insurance experiment to test this explanation. Consistent with the theoretical predictions, we find that the demand for insurance is lower when the nonperformance risk is ambiguous than when it is known and when decision makers are risk prudent. We cannot attribute the lower take-up of insurance to our measure of ambiguity aversion, probably because ambiguity attitudes are richer than aversion alone.

Ambiguity Aversion and Mutual Funds: Evidence from China

I provide empirical evidence of ambiguity averse investors’ behaviour in Chinas mutual funds market. My analysis is motivated by the substantial uncertainty in China’s mutual funds market, and theoretical research of decision indicates that investors would be more ambiguity averse when face higher uncertainty. The most substantial implication of the empirical research is that investors tend to place more weight on the worst signal. Across multiple horizons, fund flows will also display more sensitivity to the worst performance. I also conduct robustness test about the different rank funds by Morningstar rating and compare the positive and negative performance during the minimum performance period.

Cumulative lifetime stress exposure assessed by the STRAIN predicts economic ambiguity aversion

Uncertainty is inherent in most decisions humans make. Economists distinguish between twotypes of decision-making under non-certain conditions: those involving risk (i.e., knownoutcome probabilities) and those that involve ambiguity (i.e., unknown outcome probabilities).Prior work has identified individual differences that explain risk preferences, but less is knownabout factors associated with ambiguity aversion. Here, we hypothesized that cumulativeexposure to major stressors over the lifespan might be one factor that predicts an individuals’ambiguity aversion. Across two studies (Study 1: n = 58, Mean age = 25.7; Study 2: n = 188, Mean age =39.81), we used a comprehensive lifetime stress exposure inventory (i.e., the Stress andAdversity Inventory for Adults, or STRAIN) and a standard economic approach to quantify riskand ambiguity preferences. Greater lifetime stress exposure as measured by the STRAIN,particularly in early life, was associated with higher aversion to ambiguity but not risk attitudes.

Implied Ambiguity: Mean-Variance Inefficiency and Pricing Errors

We investigate the optimal portfolio choice problem for an investor who has a utility function of the smooth ambiguity model. We identify necessary and sufficient conditions for a given portfolio to be optimal for such an investor. We define the implied ambiguity of a portfolio as the smallest ambiguity aversion coefficient with which the portfolio is optimal, and the measure of ambiguity perception as the part of the variability in asset returns that can be attributed to the ambiguity. We show that there are one-to-one relations between the implied ambiguity, the Sharpe ratio, and the pricing errors when the portfolio is taken as the pricing portfolio, and that the measure of ambiguity perception is determined by the Sharpe ratio and the alpha. Based on the U.S. stock market data, we assess how ambiguity averse the representative investor is and what types of stocks the investor perceives as having more ambiguous returns than others. This paper was accepted by Manel Baucells, behavioral economics and decision analysis.

Behavioral Decision Making in Normative and Descriptive Views: A Critical Review of Literature

Recent studies on decision analytics frequently refer to the topic of behavioral decision making (BDM), which focuses on behavioral components of decision analytics. This paper provides a critical review of literature for re-examining the relations between BDM and classical decision theories in both normative and descriptive reviews. We attempt to capture several milestones in theoretical models, elaborate on how the normative and descriptive theories blend into each other, thus motivating the mostly prescriptive models in decision analytics and eventually promoting the theoretical progress of BDM—an emerging and interdisciplinary field. We pay particular attention to the decision under uncertainty, including ambiguity aversion and models. Finally, we discuss the research directions for future studies by underpinning the theoretical linkages of BDM with fast-evolving research areas, including loss aversion, reference dependence, inequality aversion, and models of quasi-maximization mistakes. This paper helps to understand various behavioral biases and psychological factors when making decisions, for example, investment decisions. We expect that the results of this research can inspire studies on BDM and provide proposals for mechanisms for the development of D-TEA (decision—theory, experiments, and applications).

Lower levels of directed exploration and reflective thinking are associated with greater anxiety and depression

Anxiety and depression are often associated with strong beliefs that entering specific situations will lead to aversive outcomes – even when these situations are objectively safe and avoiding them reduces well-being. A possible mechanism underlying this maladaptive avoidance behavior is a failure to reflect on: 1) appropriate levels of uncertainty about the situation, and 2) how this uncertainty could be reduced by seeking further information (i.e., exploration). To test this hypothesis, we asked a community sample of 417 individuals to complete measures of reflective cognition, exploration, and symptoms of anxiety and depression. Consistent with our hypotheses, we found significant associations between each of these measures in expected directions (i.e., positive relationships between reflective cognition and strategic information-seeking behavior or “directed exploration”, and negative relationships between these measures and anxiety/depression symptoms). Further analyses suggested that the relationship between directed exploration and depression/anxiety was due to an ambiguity aversion promoting exploration in conditions where information-seeking was not beneficial (as opposed to under-exploration when more information would aid future choices). In contrast, reflectiveness was associated with greater exploration in appropriate settings and separately accounted for differences in reaction times, decision noise, and choice accuracy in expected directions. These results shed light on the mechanisms underlying information-seeking behavior and how they may contribute to symptoms of emotional disorders. They also highlight the possibility that reflectiveness and exploration could represent novel treatment targets for those who show low levels of these tendencies – consistent with the need to develop individualized precision medicine approaches within computational psychiatry.