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Documenting the functional form of dynamic risk‐taking behaviour in a real options context using sporting contests

Stephen Easton, Sean Pinder and Steven Stern

Accounting and Finance, 2018, vol. 58, issue S1, 159-178

Abstract: Changes in risk‐taking behaviour based on interim performance are examined in high‐stakes competition. A real options framework is used to provide a richer characterisation of risk‐taking behaviour than examined in extant studies. This framework is applied to an examination of ball‐by‐ball data from 1207 cricket matches. Consistent with modelled expectations, risk taking is found to increase (decrease) at a decreasing rate following below par (above par) interim performance. This result is especially strong in situations where the resources remaining are low, a result predicted by the real options model.

Date: 2018
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Handle: RePEc:bla:acctfi:v:58:y:2018:i:s1:p:159-178