Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
7352280 | Finance Research Letters | 2017 | 6 Pages |
Abstract
Research from psychology suggests that gambler's fallacy and limited attention matter for individual decision making involving risk. We dub this combination “gambler's attention” and use it to provide a behavioral perspective on the debate over the market's mean-variance relation. A gambler's attention index is developed to divide the sample period into high-attention and low-attention regimes. Using data from China, we find clear-cut evidence that the market's mean-variance relation is significantly positive in low-attention periods but not in high-attention periods. The results are consistent with the notion that gambler's attention undermines an otherwise positive risk-return tradeoff in high-attention periods.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Jing Yao, Lingyan Wu,