Investor Perception/Anticipation of Tail Events

Posted in Animal Spirits

 

How do individuals perceive and position for Black Swans? In his March 2013 paper entitled “The Psychology of Tail Events: Progress and Challenges”, Nicholas Barberis employs a two-step framework to summarize recent research on the psychology of tail events. He first addresses belief about the probability of a tail event. He then covers actions/decisions based on this belief, with focus on the concept of probability weighting. Based on the available body of research, he finds that: (more…)

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