The Psychology of Tail Events: Progress and Challenges
12 Pages Posted: 12 Mar 2013
Date Written: March 11, 2013
Abstract
Over the past decade, there has been a surge of interest in “tail events” – rare, high-impact events. In this article, I start by summarizing some recent progress in our understanding of the psychology of tail events. I suggest that much of this progress has centered on the concept of “probability weighting” and, in particular, on applications of this concept in various fields of economics. I then describe some major open questions in this area.
Keywords: tail event, probability weighting, prospect theory
JEL Classification: D1, D8, G1
Suggested Citation: Suggested Citation
Register to save articles to
your library
Paper statistics
Recommended Papers
-
Does Academic Research Destroy Stock Return Predictability?
By R. David Mclean and Jeffrey Pontiff
-
By Andrew Ang
-
Moore's Law vs. Murphy's Law: Algorithmic Trading and Its Discontents
By Andrei A. Kirilenko and Andrew W. Lo
-
The Low Risk Anomaly: A Decomposition into Micro and Macro Effects
By Malcolm P. Baker, Brendan Bradley, ...
-
Using Maximum Drawdowns to Capture Tail Risk
By Wesley R. Gray and Jack Vogel
-
…and the Cross-Section of Expected Returns
By Campbell R. Harvey, Yan Liu, ...
-
By Nick Baltas and Robert Kosowski
-
Inside the 'Black Box' of Sell-Side Financial Analysts
By Lawrence D. Brown, Andrew C. Call, ...
-
A Five-Factor Asset Pricing Model
By Eugene F. Fama and Kenneth R. French
-
A Trend Factor: Any Economic Gains from Using Information over Investment Horizons?
By Yufeng Han, Guofu Zhou, ...