Subjective Bayesian Beliefs

44 Pages Posted: 10 Apr 2013 Last revised: 17 Sep 2013

See all articles by Constantinos Antoniou

Constantinos Antoniou

University of Warwick - Warwick Business School

Glenn W. Harrison

Georgia State University - J. Mack Robinson College of Business

Morten I. Lau

Durham Business School

Daniel Read

University of Warwick - Warwick Business School

Date Written: August 2013

Abstract

A large literature suggests that many individuals do not apply Bayes Rule correctly when making decisions that depend on them correctly pooling prior information and sample data. We replicate and extend a classic experimental study of Bayesian updating from psychology, employing the methods of experimental economics, with careful controls for the confounding effects of risk aversion. Our results show that risk aversion significantly alters inferences on deviations from Bayes Rule.

Keywords: Bayesian Updating, Risk Aversion, Probability Weighting

JEL Classification: B41, C51, C91, D81, G12

Suggested Citation

Antoniou, Constantinos and Harrison, Glenn William and Lau, Morten Igel and Read, Daniel, Subjective Bayesian Beliefs (August 2013). WBS Finance Group Research Paper No. 199, Available at SSRN: https://ssrn.com/abstract=2247318 or http://dx.doi.org/10.2139/ssrn.2247318

Constantinos Antoniou (Contact Author)

University of Warwick - Warwick Business School ( email )

Coventry CV4 7AL
United Kingdom

Glenn William Harrison

Georgia State University - J. Mack Robinson College of Business ( email )

P.O. Box 4050
Atlanta, GA 30303-3083
United States
407-489-3088 (Phone)
253-830-7636 (Fax)

HOME PAGE: http://www.cear.gsu.edu/

Morten Igel Lau

Durham Business School ( email )

Mill Hill Lane
Durham, DH1 3LB
United Kingdom

Daniel Read

University of Warwick - Warwick Business School ( email )

Coventry CV4 7AL
United Kingdom

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