Behavioural finance theories draw on evidence from psychology that suggest that some people respond to information in a biased manner, and construct theories of inefficient markets. However, these biases are not always robust when tested in economic conditions, which casts doubt on their...

We design an experiment to test the hypothesis that, in violation of Bayes Rule, some people respond more forcefully to the strength of information than to its weight. We provide incentives to motivate effort, use naturally occurring information, and control for risk attitude. We find that the...