Abstract for:

Wishful Thinking

Guy  Mayraz,  November 2011
Paper No' CEPDP1092: | Full paper (pdf)
Save Reference as: BibTeX BibTeX File | Endote EndNote Import File
Keywords: Wishful-thinking; optimal expectations, priors and desires, payoff-dependent beliefs, asset prices

JEL Classification: D01; D03; D81; D84; G11

Is hard copy/paper copy available? YES - Paper Copy Still In Print.
This Paper is published under the following series: CEP Discussion Papers
Share this page: Google Bookmarks Google Bookmarks | Facebook Facebook | Twitter Twitter

Abstract:

An experiment tested whether and in what circumstances people are more likely to believe an event simply because it makes them better off. Subjects observed a financial asset's historical price chart, and received both an accuracy bonus for predicting the price at some future point, and an unconditional award that was either increasing or decreasing in this price. Despite incentives for hedging, subjects gaining from high prices made significantly higher predictions than those gaining from low prices. The magnitude of the bias was smaller in charts with less subjective uncertainty, but was independent of the amount paid for accurate predictions.