Preferences for skewness: evidence from a binary choice experiment

Tobias Brünner, René Levínský () and Jianying Qiu

The European Journal of Finance, 2011, vol. 17, issue 7, 525-538

Abstract: In this paper, we experimentally test skewness preferences at the individual level. Several prospects that can be ordered with respect to the third-degree stochastic dominance criterion are ranked by the participants of the experiment. We find that the skewness of a distribution has a significant impact on the decisions. Yet, while skewness has an impact, its direction differs substantially across subjects: 39% of our subjects demonstrate a statistically significant preference for skewness and 10% seem to avoid skewness (at 5% level). On the level of individual decisions we find that the variances of the prospects and subjects' experience increase the probability of choosing the lottery with greater skewness.

Keywords: skewness; stochastic dominance; decision-making under uncertainty (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (26)

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DOI: 10.1080/1351847X.2010.495478

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