Biased risk perceptions: Evidence from the laboratory and financial markets

Payzan-LeNestour, E; Pradier, L; Putniņš, TJ

Biased risk perceptions: Evidence from the laboratory and financial markets

Payzan-LeNestour, E Pradier, L Putniņš, TJ

Permalink

Publication Type:: Journal Article
Citation:: Journal of Banking and Finance, 2023, 154
Issue Date:: 2023-09-01

Embargoed

	Filename	Description	Size
	Biased risk perceptions Evidence from the laboratory and financial markets.pdf	Accepted Version	1.51 MB	Adobe PDF	View/Open

Copyright Clearance Process

Recently Added
In Progress
Embargoed
Open Access

This item is currently unavailable due to the publisher's embargo.

The embargo period expires on 1 Sep 2025

Full metadata record

Field	Value	Language
dc.contributor.author	Payzan-LeNestour, E
dc.contributor.author	Pradier, L
dc.contributor.author	Putniņš, TJ
dc.date.accessioned	2024-04-29T10:38:27Z
dc.date.available	2024-04-29T10:38:27Z
dc.date.issued	2023-09-01
dc.identifier.citation	Journal of Banking and Finance, 2023, 154
dc.identifier.issn	0378-4266
dc.identifier.uri	http://hdl.handle.net/10453/178486
dc.description.abstract	Applying a well-established neuroscience framework to the issue of investor perception of volatility, we propose that after prolonged exposure to high volatility, investors tend to underestimate volatility due to adaptation to the high volatility, and vice versa. Using a combination of field and laboratory tests, we find strong support for this hypothesis. The evidence suggests that this neurobiologically-grounded perceptual bias can cause distortions of asset prices in sophisticated and liquid financial markets.
dc.language	en
dc.relation.ispartof	Journal of Banking and Finance
dc.relation.isbasedon	10.1016/j.jbankfin.2022.106685
dc.rights	info:eu-repo/semantics/embargoedAccess
dc.subject	0102 Applied Mathematics, 1401 Economic Theory, 1502 Banking, Finance and Investment
dc.subject.classification	Finance
dc.subject.classification	3502 Banking, finance and investment
dc.subject.classification	4901 Applied mathematics
dc.title	Biased risk perceptions: Evidence from the laboratory and financial markets
dc.type	Journal Article
utslib.citation.volume	154
utslib.for	0102 Applied Mathematics
utslib.for	1401 Economic Theory
utslib.for	1502 Banking, Finance and Investment
pubs.organisational-group	University of Technology Sydney
pubs.organisational-group	University of Technology Sydney/Faculty of Business
pubs.organisational-group	University of Technology Sydney/Faculty of Business/Finance Discipline
utslib.copyright.status	embargoed	*
utslib.copyright.embargo	2025-09-01T00:00:00+1000Z
dc.date.updated	2024-04-29T10:38:25Z
pubs.publication-status	Published
pubs.volume	154

Abstract:

Applying a well-established neuroscience framework to the issue of investor perception of volatility, we propose that after prolonged exposure to high volatility, investors tend to underestimate volatility due to adaptation to the high volatility, and vice versa. Using a combination of field and laboratory tests, we find strong support for this hypothesis. The evidence suggests that this neurobiologically-grounded perceptual bias can cause distortions of asset prices in sophisticated and liquid financial markets.

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10453/178486