The effect of unknown unknowns on households: Center for research in decision making under risk and ambiguity (CentR-A)
Navn på bevillingshaver
Steffen Meyer
Titel
Professor
Institution
Aarhus University
Beløb
DKK 9,840,916
År
2023
Bevillingstype
Semper Ardens: Accomplish
Hvad?
Everybody faces decisions for which risks are difficult to gauge (uncertainty) in daily life. This project investigates how uncertainty affects our financial decisions, such as deciding on loans for a house or trading decisions in the stock market. If we learn more about the quality of decisions in these situations, it becomes easier to devise tools to allow households to make smarter decisions.
Hvorfor?
Crises in which it is difficult to forecast the future have occurred frequently (e.g., the financial crisis, COVID-19, or the Russian invasion of Ukraine). Theory suggests that uncertainty affects decision-making negatively: When households were found to make suboptimal decisions in uncertain times, e.g., not refinance a mortgage when it is favorable, then insights can be used to improve welfare.
Hvordan?
The project builds on one of the world’s largest databases on individual trading decisions on the stock market and Danish individuals’ decision-making via Danish registry data. The project will use econometric methods to identify the causal impact of ambiguity on household decisions.