Open Access. Powered by Scholars. Published by Universities.®
Articles 1 - 2 of 2
Full-Text Articles in Business
Myopic Regret Avoidance: Feedback Avoidance And Learning In Repeated Decision Making, Jochen Reb, Terry Connolly
Myopic Regret Avoidance: Feedback Avoidance And Learning In Repeated Decision Making, Jochen Reb, Terry Connolly
Research Collection Lee Kong Chian School Of Business
Decision makers can become trapped by myopic regret avoidance in which rejecting feedback to avoid short-term outcome regret (regret associated with counterfactual outcome comparisons) leads to reduced learning and greater long-term regret over continuing poor decisions. In a series of laboratory experiments involving repeated choices among uncertain monetary prospects, participants primed with outcome regret tended to decline feedback, learned the task slowly or not at all, and performed poorly. This pattern was reversed when decision makers were primed with self-blame regret (regret over an unjustified decision). Further, in a final experiment in which task learning was unnecessary, feedback was more …
Forecast Accuracy Uncertainty And Momentum, Bing Han, Dong Hong, Mitchell Craig Warachka
Forecast Accuracy Uncertainty And Momentum, Bing Han, Dong Hong, Mitchell Craig Warachka
Research Collection Lee Kong Chian School Of Business
We demonstrate that stock price momentum and earnings momentum can result from uncertainty surrounding the accuracy of cash flow forecasts. Our model has multiple information sources issuing cash flow forecasts for a stock. The investor combines these forecasts into an aggregate cash flow estimate that has minimal mean-squared forecast error. This aggregate estimate weights each cash flow forecast by the estimated accuracy of its issuer, which is obtained from their past forecast errors. Momentum arises from the investor gradually learning about the relative accuracy of the information sources and updating their weights. Empirical tests validate the model's prediction of stronger …