Fear of the Unknown: Familiarity and Economic Decisions

摘要：

Evidence indicates that individuals prefer proximate, familiar choices and dislike ex- changes from status quo positions. We offer an integrated explanation for these phenomena based upon fear of change and of the unfamiliar. In our model, individuals who face model uncertainty focus on adverse scenarios in evaluating defections from familiar choice options. We derive excessive inertia in individual choices, consistent with the endowment effect, home and local biases, high hurdle rates and escalation bias in capital budgeting, limited investor diversification, and attention effects wherein news on average increases demand for a stock. Empirical simulations indicate that plausible levels of model uncertainty imply severe un- derdiversification and home bias.

作者: H. Henry Cao David Hirshleifer Harold H. Zhang

作者单位: Kenan-Flagler Business School,University of North Carolina, Chapel Hill, NC 27599-3490, USA Fisher School of Business, Ohio State University, Columbus, OH 43210-1144

会议类型: 国际会议

会议名称: 2005年中国国际金融年会

会议地点: 昆明

会议语种:英文

在线出版日期: 2005-07-05（万方平台首次上网日期，不代表论文的发表时间）