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| Author: | Shavit, T. Sonsino, D. Benzion, U. |
| Title: | On the Evaluation of Options on Lotteries: An Experimental Study |
| Journal: | Journal of Psychology and Financial Markets
2002 : VOL. 3:3, p. 168-181 |
| Index terms: | OPTIONS FIELD RESEARCH LOTTERIES EVALUATION |
| Language: | eng |
| Abstract: | The authors present the results of a comparative experimental study of the evaluation of simple lotteries and call/put/insurance options on these lotteries. The main findings and conclusions are: (a) The observed bidding patterns depend on the type of asset under evaluation. In particular, subject behavior when buying or selling a basic lottery seems much more cautious than their behavior when buying or selling options on that lottery. (b) The observed bidding patterns also depend on subject positions with respect to the underlying asset. The bids for buying lotteries and options long are statistically uncorrelated with the bids for selling the same lotteries and options short. (c) Subjects with extreme risk attitudes are more inclined to violate basic no-arbitrage conditions when bidding for the different lotteries. |
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