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ToolsMassari, Filippo (2020) Under-reaction: Irrational behavior or robust response to model misspecification?
Full text not available from this repository.Abstract
Under-reaction is a robust response to model misspecification rewarded by financial markets, rather than an “irrational” attitude that leads to extinction. I show that under-reacting rules guarantee predictions as accurate as Bayes’ in well-specified learning problems and beat Bayes’ in many misspecified learning environments. Therefore, when a Bayesian agent trades with an under-reacting agent with the same information, there are no paths on which the under-reacting agent loses all his wealth against the Bayesian, while there is a large class of misspecified learning settings in which the Bayesian agent loses all his wealth against the under-reacting agent.
| Item Type: | Article |
|---|---|
| Faculty \ School: | Faculty of Social Sciences > School of Economics |
| UEA Research Groups: | Faculty of Social Sciences > Research Groups > Behavioural Economics Faculty of Social Sciences > Research Groups > Economic Theory |
| Related URLs: | |
| Depositing User: | LivePure Connector |
| Date Deposited: | 23 Jul 2020 23:49 |
| Last Modified: | 04 Sep 2021 23:42 |
| URI: | https://ueaeprints.uea.ac.uk/id/eprint/76262 |
| DOI: |
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