This paper considers a sequence of discrete-time random walk markets with a single risky asset, and gives conditions for the existence of arbitrage opportunities or free lunches with vanishing risk, of the form of waiting to buy and selling the next period, with no shorting, and furthermore for...

This experimental study is concerned with the impact of the timing of the resolution of risk onpeople's willingness to take risks, with a special focus on the role of affect. While the importanceof anticipatory emotions has so far been only inferred from decisions regarding hypothetical...

This paper analyzes optimal hedging of a tradable risk (e.g. price risk or exchange rate risk) with forward contracts in the presence of untradable inflation risk. Utility is defined over real wealth. Optimal forward positions are derived relative to a given initial exposure in the tradable...

Foster and Hart proposed an operational measure of riskiness for discrete random variables. We show that their defining equation has no solution for many common continuous distributions. We show how to extend consistently the definition of riskiness to continuous random variables. For many...

For loss averse investors, a sequence of risky investments looks less attractive if it is evaluated myopically — an effect called myopic loss aversion (MLA). The consequences of this effect have been confirmed in several experiments and its robustness is largely undisputed. The effect's...

We apply a new and innovative approach to communicating risks associated with financial products that should support investors in making better investment decisions. In our experiments, participants are able to gain “simulated experience” by random sampling of a previously described return...

According to the behavioral concept of myopic loss aversion (MLA), investors are more willing to take risks if they are less frequently informed about their portfolio performance. This prediction of MLA has been confirmed in various experimental studies and the conclusion has been drawn that...