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Skewness seeking: risk loving, optimism or overweighting of small probabilities?

Åstebro, Thomas ; Mata, José ; Santos-Pinto, Luís

In: Theory and Decision, 2015, vol. 78, no. 2, p. 189-208

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    Titre
    • Skewness seeking: risk loving, optimism or overweighting of small probabilities?
    Auteur
    • Åstebro, Thomas. HEC Paris, Paris, France
    • Mata, José. Nova School of Business and Economics, Lisbon, Portugal
    • Santos-Pinto, Luís. Faculty of Business and Economics, University of Lausanne, Internef 535, 1015, Lausanne, Switzerland
    Type de document
    • Postprint
    Langue
    • Anglais
    Publié dans
    • Theory and Decision, 2015, vol. 78, no. 2, p. 189-208. Springer US; http://www.springer-ny.com
    Autre version électronique
    Identifiant OAI-PMH
    • oai:doc.rero.ch:331442
    Summary
    In a controlled laboratory experiment we use one sample of college students and one of mature executives to investigate how positive skew influences risky choices. In reduced-form regressions we find that both students and executives make riskier choices when lotteries display positive skew. We estimate decision models to explore three explanations for skew seeking choices: risk-loving (convex utility), optimism (concave probability weighting) and likelihood insensitivity (inverse s-shape probability weighting). We find no role for love for risk as neither students nor executives have convex utility. Both optimism and likelihood insensitivity play a part in skew seeking choices. Likelihood insensitivity is larger for students than for executives. Executives have more concave utility and are more optimistic than students, but this is found to be largely due to them being older.