The Institute for Mathematical Behavioral Sciences presents

"Ambiguity, Familiarity, and the Equity Home Bias Puzzle: Theory and Evidence from Choice Experiments involving Neuroimaging and Molecular Genetics"
with Chew Soo Hong, National University of Singapore

Thursday, April 11
4:00-5:00 p.m.
Social Science Plaza A, Room 2112 (Luce Conference Room)

In his 1921 Treatise on Probability, John Maynard Keynes offered a striking hypothesis about decision making under uncertainty: "... if two probabilities are equal in degree, ought we, in choosing our course of action, to prefer that one which is based on a greater body of knowledge?" This hypothesis has led to two significant strands of thinking in the decision theory literature - ambiguity aversion, discussed in Daniel Ellsberg's seminal paper in 1961, and familiarity bias, articulated in several papers by Amos Tversky and his coauthors in the 90's. The latter papers further suggest that familiarity bias may underpin the equity home market bias puzzle, first documented by Feldsteina and Horioka (1980) and French and Poterba (1991). This is subsequently corroborated in the works of Huberman (2001) and Coval and Moskowitz (2002) which provide evidence of a domestic home market bias favoring shares in companies that are geographically proximate. This talk will discuss findings from several experimental studies including one using molecular genetics and neuroimaging to establish a gene-brain-behavior link for familiarity bias.

For further information, please contact Janet Phelps, jjphelps@uci.edu or 949-824-8651.

 

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