Brünner, Tobias, Levínský, René and Qiu, Jianying (2011) Preferences for skewness: evidence from a binary choice experiment. The European Journal of Finance, 17 (7). pp. 525-538. ISSN 1351-847X
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1351847x%2E2010%2E495478.pdf - Whole Document Restricted to Repository staff only 342kB |
Item Type: | Article |
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Item Status: | Live Archive |
Abstract
In this paper, we experimentally test skewness preferences at the individual level. Several prospects that can be ordered with respect to the third-degree stochastic dominance criterion are ranked by the participants of the experiment. We find that the skewness of a distribution has a significant impact on the decisions. Yet, while skewness has an impact, its direction differs substantially across subjects: 39% of our subjects demonstrate a statistically significant preference for skewness and 10% seem to avoid skewness (at 5% level). On the level of individual decisions we find that the variances of the prospects and subjects’ experience increase the probability of choosing the lottery with greater skewness.
Keywords: | Skewness, Stochastic dominance, Decision-making under uncertainty |
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Subjects: | N Business and Administrative studies > N300 Finance L Social studies > L120 Microeconomics L Social studies > L100 Economics L Social studies > L111 Financial Economics |
Divisions: | Lincoln International Business School |
Related URLs: | |
ID Code: | 18584 |
Deposited On: | 10 Sep 2015 16:02 |
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