The Psychology of Tail Events: Progress and Challenges

12 Pages Posted: 12 Mar 2013

See all articles by Nicholas Barberis

Nicholas Barberis

Yale School of Management; National Bureau of Economic Research (NBER)

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

Barberis, Nicholas, The Psychology of Tail Events: Progress and Challenges (March 11, 2013). Available at SSRN: https://ssrn.com/abstract=2231781 or http://dx.doi.org/10.2139/ssrn.2231781

Nicholas Barberis (Contact Author)

Yale School of Management ( email )

135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States
203-436-0777 (Phone)

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

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