Journal of Financial Economics Vol. 143 No. 3 2022
Outlier blindness: A neurobiological foundation for neglect of financial risk
Abstract
How do people record information about the outcomes they observe in their environment? Building on a well-established neuroscientific framework, we propose a model in which people are hampered in their perception of outcomes that they expect to seldom encounter. We provide experimental evidence for such “outlier blindness” and discuss how it provides a microfoundation for neglected tail risk by investors in financial markets.
- DOI
- 10.1016/j.jfineco.2021.06.019
- Volume
- 143
- Issue
- 3
- Pages
- 1316-1343
- Language
- en
- Sources
- crossref bibtex:phds-export.bib openalex