Séminaires

Hedge your bets: Risk reduction strategies on a real-world betting market

Economie et Sciences de la décision

Intervenant : Thomas Epper
University of St.Gallen

23 mars 2017 - T022 - De 11h00 à 12h00


Many people engage in gambling on actuarially unfair terms. For this reason,
it has long been argued that risk seeking is a prerequisite for participating in
gambling. We document a series of findings which are apparently inconsistent with
the notion of risk proneness. In particular, we find a strong disparity between
risk attitudes rationalizing market entrance and risk attitudes rationalizing betting
transactions. More specifically, we show that, while risk proneness is needed for
engaging in betting per se, bettors make use of risk reduction strategies once they
made the decision to bet. Importantly, these risk reduction strategies are systematic
and not due to random error. Our findings impose important restrictions on theories
of risky choice. A unifying characterization of preferences explaining both, market
participation and market transactions requires individuals to have a preference
for positive skewness (to select into the market) and an aversion towards spread
(to engage in risk reduction strategies). We argue that such risk preferences are
consistent with a wide array of behaviors outside of betting markets. When exploring
the strategies bettors choose on the market, we find that a considerable fraction
of bettors (about one-third of our sample) combines different bets into a portfolio
of bets. By doing so, they hedge the risk of the single bet and reduce the overall
risk exposure. Interestingly, the majority of subjects engaging in such strategies
follows a strategy best described as *native diversification*. Specifically, these
bettors split up equally the total betting amount across a number of events. We
analyze the characteristics of these hedges and establish a link to behavior on
financial markets.​

titre : TBA

Economie et Sciences de la décision

Intervenant : Harry Di Pei
Northwestern

12 février 2019


titre : TBA

Economie et Sciences de la décision

Intervenant : François Geerolf
UCLA

18 décembre 2018


titre : TBA

Economie et Sciences de la décision

Intervenant : Marko Tervio
Aalto

13 décembre 2018


Titre : TBA

Economie et Sciences de la décision

Intervenant : Olivier Deschenes
UCSB

29 novembre 2018


titre : TBA

Economie et Sciences de la décision

Intervenant : Emmanuele Tarantino
Mannheim University

27 novembre 2018



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