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Risk and Reward Preferences under Time Pressure

Nursimulu, Anjali D. and Bossaerts, Peter (2014) Risk and Reward Preferences under Time Pressure. Review of Finance, 18 (3). pp. 999-1022. ISSN 1572-3097. https://resolver.caltech.edu/CaltechAUTHORS:20141110-160957062

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Abstract

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 time-varying 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.


Item Type:Article
Related URLs:
URLURL TypeDescription
http://dx.doi.org/10.1093/rof/rft013DOIArticle
http://rof.oxfordjournals.org/content/18/3/999PublisherArticle
ORCID:
AuthorORCID
Bossaerts, Peter0000-0003-2308-2603
Additional Information:© The Authors 2013. Published by Oxford University Press [on behalf of the European Finance Association]. Advance Access publication: June 27, 2013.
Issue or Number:3
Classification Code:JEL codes :C91, D81
Record Number:CaltechAUTHORS:20141110-160957062
Persistent URL:https://resolver.caltech.edu/CaltechAUTHORS:20141110-160957062
Official Citation:Nursimulu, A. D., & Bossaerts, P. (2014). Risk and Reward Preferences under Time Pressure. Review of Finance, 18(3), 999-1022. doi: 10.1093/rof/rft013
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:51537
Collection:CaltechAUTHORS
Deposited By: Jason Perez
Deposited On:11 Nov 2014 00:23
Last Modified:03 Oct 2019 07:33

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