Authors:

  • Andrei Shleifer

Excerpt

Salience and Asset Prices. Andrei Shleifer, May 2013, Paper. "In Bordalo, Germaoli, and Shleifer (2012a) – henceforth, BGS (2012a) – we described a new approach to choice under risk that we called salience theory. In comparisons of risky lotteries, we argued, individuals’ attention is drawn to those payoffs which are most different or salient relative to the average. In making choices, individuals overweight these salient payoffs relative to their objective probabilities. A simple formalization of such salience-based probability weighting provides an intuitive account of a variety of puzzling evidence in the decision theory..." Link Verified October 18, 2014