When asset returns are unstable, investment performance directly depends on learning about their patterns optimally. Without optimal learning, strong investment performance is not possible. Yet, optimal learning is often considered too complex for investors to achieve. In order to test this...

Neoclassical finance assumes that investors are Bayesian. In many realistic situations, Bayesian learning is challenging. Here, we consider investment opportunities that change randomly, while payoffs are observable only when invested. In a stylized version of the task, we wondered whether...

How do people record information about the outcomes they observe in their environment? Building on a well-established neuroscientific framework, we propose a model in which people are hampered in their perception of outcomes that they expect to seldom encounter. We provide experimental evidence...

We investigate subjective reactions when subjects realize they have been victims of framing-effects in situations of risky choices - that is, when they violated the invariance principle in decision-theory. We try to assess various explanations of this violation in terms of bounded rationality...

Neuroeconomics is an emerging field crossing neuroscientific data, the use of brain-imaging tools, experimental and behavioral economics, and an attempt at a better understanding of the cognitive assumptions that underlie theoretical predictive economic models. In this paper the authors try two...

People often expose themselves to negative tail risk by taking on losing bets in which randomly-occurring major losses eradicate all previous gains. Why is this? Here I present evidence from a collection of laboratory experiments aimed at testing several plausible causal explanations.The...

How do people record information about the economic outcomes they observe in their environment? Building on a well-established neuroscientific framework, we propose a model in which people are not attuned to making distinctions between realized outcomes that they seldom expect to encounter. We...

How do economic agents perceive risk? We address this question through the neurosciencetheory of adaptive normalization, which predicts that after prolonged exposure to highvolatility, people perceive moderate volatility as lower than the actual level (and vice versa)due to adaptation to the...

In a series of controlled laboratory experiments, we provide evidence for "Craving by Design" (CbD) hypothesis, where people knowingly expose themselves to negative tail risk due to craving for monetary gains. We then document the "cheap call selling anomaly:" selling calls priced below $1 has...