Tuesday, August 23, 2011

Condie - Risk and Uncertainty

tBelow the fold is an interview with Dr. Scott Condie, who traveled with me through BYU and then Cornell's economics programs. He discusses his behavioral models of financial risk and uncertainty. The question is what people do when their information is highly ambiguous: we know there's more than a 25% chance of a strange coin toss coming up heads, but it might be 33% or it might be 50% or it might be 60%, and we just don't know. And if some investors are more than risk averse, but loss averse or maximin-ers or something else, that adds more complications. In that world then, how do markets respond, how informative are prices, and what opportunities are there for people with inside information to rig the system?


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