Who is ‘behavioral’? cognitive ability and anomalous preferences
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This article found that small-stakes risk aversion and short-run discounting are less common among those with higher standardized test scores in Chilean high-school students with similar schooling backgrounds and found some evidence that elementary-school GPA is predictive of preferences measured at the end of high school.Abstract:
In this paper, we ask whether variation in preference anomalies is related to variation in cognitive ability. Evidence from a new laboratory study of Chilean high-school students with similar schooling backgrounds shows that small-stakes risk aversion and short-run discounting are less common among those with higher standardized test scores. The relationship with test scores survives controls for parental education and wealth. We find some evidence that elementary-school GPA is predictive of preferences measured at the end of high school. Two laboratory interventions provide suggestive evidence of a possible causal impact of cognitive resources on expressed preferences. (JEL: J24, D14, C91).read more
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Prospect theory: analysis of decision under risk
Daniel Kahneman,Amos Tversky +1 more
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Chapter 11 Working memory
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THE EQUITY PREMIUM A Puzzle
Rajnish Mehra,Edward C. Prescott +1 more
TL;DR: This paper showed that an equilibrium model which is not an Arrow-Debreu economy will be the one that simultaneously rationalizes both historically observed large average equity return and the small average risk-free return.