Individual Preferences, Monetary Gambles, and Stock Market Participation: A Case for Narrow Framing

@article{Barberis2006IndividualPM,
  title={Individual Preferences, Monetary Gambles, and Stock Market Participation: A Case for Narrow Framing},
  author={N. Barberis and M. Huang and Richard H. Thaler},
  journal={Behavioral & Experimental Finance},
  year={2006}
}
We argue that ?narrow framing,? whereby an agent who is offered a new gamble evaluates that gamble in isolation, may be a more important feature of decisionmaking than previously realized. Our starting point is the evidence that people are often averse to a small, independent gamble, even when the gamble is actuarially favorable. We find that a surprisingly wide range of utility functions, including many nonexpected utility specifications, have trouble explaining this evidence, but that this… Expand
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