Speaker:Soohong Chew, Professor of National University of Singapore

Host:Pro. Xie Danyang

Topic:Ambiguity, Familiarity, and the Equity Home Bias Puzzle: Theory and Evidence from Choice Experiments involving Neuroimaging and Molecular Genetics

Time:June 26, 2013, 3:00pm

Location:B249, EMS

Organizer:Department of Mathematical Economics & Finance

About the Lecture:In his 1921 Treatise on Probability, John Maynard Keynes offered a striking hypothesis about decision making under uncertainty: "... if two probabilities are equal in degree, ought we, in choosing our course of action, to prefer that one which is based on a greater body of knowledge?" This hypothesis has led to two significant strands of thinking in the decision theory literature - ambiguity aversion, discussed in Daniel Ellsberg's seminal paper in 1961, and familiarity bias, articulated in several papers by Amos Tversky and his coauthors in the 90's. The latter papers further suggest that familiarity bias may underpin the equity home market bias puzzle, first documented by Feldsteina and Horioka (1980) and French and Poterba (1991). This is subsequently corroborated in the works of Huberman (2001) and Coval and Moskowitz (2002) which provide evidence of a domestic home market bias favoring shares in companies that are geographically proximate. This talk will discuss findings from several experimental studies including one using molecular genetics and neuroimaging to establish a gene-brain-behavior link for familiarity bias.

About the Speaker:Soohong Chew is PhD of University of British Columbia and professor of National University of Singapore. His selected publications include:

1. Chew SH and J. S. Sagi, “An Inequality Measure for Stochastic Allocations”, Journal of Economic Theory 147 (2012), 1517-1544

2. Zhong S, Israel S, Xue H, Sham P, Ebstein R, and Chew SH. “A Neurochemical Approach to Valuation Sensitivity over Gains and Losses” Proceedings of the Royal Society B: Biological Sciences 276 (2009): 4181-4188

3. Chew SH and J. S. Sagi, “Small Worlds: Modeling attitudes toward Sources of Uncertainty”, Journal of Economic Theory 139 (2008): 1-24

4. Chew SH and J. S. Sagi, “Event Exchangeability: Probabilistic Sophistication without Monotonicity or Continuity”, Econometrica 74 (2006): 771-786

5. Chew SH and G. Tan, “The Market for Sweepstakes”, Review of Economic Studies 72 (2005): 1009-1029

6. Chew SH, L.G. Epstein and U. Segal, “Mixture Symmetry and Quadratic Utility” Econometrica 59 (1991): 139-163

7. Chew SH and L.G. Epstein, “A Unifying Approach to Axiomatic Non-Expected Utility Theory” Journal of Economic Theory 49 (1989): 207-240

8. Chew SH and L.G. Epstein, “The Structure of Preferences and Attitudes towards the Timing of the Resolution of Uncertainty” International Economic Review 30 (1989): 103-117

9. Chew SH, E. Karni and Z. Safra, “Risk Aversion in the Theory of Expected Utility Theory with Rank-Dependent Probabilities” Journal of Economic Theory 42 (1987): 370-381

10. Chew SH, “A Generalization of the Quasilinear Mean with Application to the Measurement of Income Inequality and Decision Theory Resolving the Allais Paradox” Econometrica 51 (1983): 1065-1092