Do Professionals Get it Right? Limited Attention and Risk‐Taking Behaviour

32 Pages Posted: 26 May 2016

See all articles by Reto Foellmi

Reto Foellmi

University of St. Gallen - Swiss Institute for International Economics and Applied Economic Research

Stefan Legge

University of St. Gallen - SEPS: Economics and Political Sciences; University of St. Gallen - Swiss Institute for International Economics and Applied Economic Research

Lukas Schmid

University of Lucerne

Date Written: May 2016

Abstract

Does information processing affect individual risk‐taking behaviour? This article provides evidence that professional athletes suffer from a left‐digit bias when dealing with signals about differences in performance. Using data from the highly competitive field of World Cup alpine skiing for the period of 1992–2014, we show that athletes misinterpret actual differences in race times by focusing on the leftmost digit, which results in increased risk‐taking behaviour. For the estimation of causal effects, we exploit the fact that tiny time differences can be attributed to random shocks. We find no evidence that high‐stakes situations or individual experience reduce the left‐digit bias.

Suggested Citation

Foellmi, Reto and Legge, Stefan and Schmid, Lukas, Do Professionals Get it Right? Limited Attention and Risk‐Taking Behaviour (May 2016). The Economic Journal, Vol. 126, Issue 592, pp. 724-755, 2016, Available at SSRN: https://ssrn.com/abstract=2784045 or http://dx.doi.org/10.1111/ecoj.12375

Reto Foellmi (Contact Author)

University of St. Gallen - Swiss Institute for International Economics and Applied Economic Research ( email )

Bodanstrasse 8
St. Gallen, 9000
Switzerland
+41-71-224-2269 (Phone)
+41-71-224-2298 (Fax)

Stefan Legge

University of St. Gallen - SEPS: Economics and Political Sciences ( email )

Rosenbergstrasse 51
St. Gallen, St. Gallen CH-9000
Switzerland

University of St. Gallen - Swiss Institute for International Economics and Applied Economic Research

Bodanstrasse 8
St.Gallen, 9000
Switzerland

Lukas Schmid

University of Lucerne ( email )

Hofstrasse 9
P.O. Box 7464
Luzern 7, CH - 6000
Switzerland

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