Variation in risk seeking behaviour following large losses: a natural experiment

Title: Variation in risk seeking behaviour following large losses: a natural experiment
Creator: Page, Lionel; Savage, David A.; Torgler, Benno
Relation: ARC.FT110100463 & ARC DE120101270 http://purl.org/au-research/grants/arc/FT110100463
Relation: European Economic Review Vol. 71, Issue October 2014, p. 121-131
Publisher Link: http://dx.doi.org/10.1016/j.euroecorev.2014.04.009
Publisher: Elsevier
Resource Type: journal article
Date: 2014
Description: This study explores people׳s risk taking behaviour after having suffered large real-world losses following a natural disaster. Using the margins of the 2011 Australian floods (Brisbane) as a natural experimental setting, we find that homeowners who were victims of the floods and face large losses in property values are 50% more likely to opt for a risky gamble – a scratch card giving a small chance of a large gain ($500,000) – than for a sure amount of comparable value ($10). This finding is consistent with prospect theory predictions regarding the adoption of a risk-seeking attitude after a loss.
Subject: decision under risk; large losses; natural experiment
Identifier: http://hdl.handle.net/1959.13/1356405
Identifier: uon:31698
Identifier: ISSN:0014-2921
Language: eng
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