Evolution of Subjective Hurricane Risk Perceptions: A Bayesian Approach

David Kelly, David Letson, Forest Nelson (), David S. Nolan () and Daniel Solis
Additional contact information
Forest Nelson: Department of Economics, Henry B. Tippie College of Business Administration, University of Iowa
David S. Nolan: Rosenstiel School of Marine and Atmospheric Science, University of Miami

No 905, Working Papers from University of Miami, Department of Economics

Abstract: This paper studies how individuals update subjective risk perceptions in response to hurricane track forecast information, using a unique data set from an event market, the Hurricane Futures Market (HFM). We derive a theoretical Bayesian framework which predicts how traders update their perceptions of the probability of a hurricane making landfall in a certain range of coastline. Our results suggest that traders behave in a way consistent with Bayesian updating but this behavior is based on the perceived quality of the information received.

Keywords: risk perceptions; learning; Bayesian learning; event markets; prediction markets; favorite-longshot bias; hurricanes (search for similar items in EconPapers)
JEL-codes: C53 C9 D83 G14 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2009-02-27
New Economics Papers: this item is included in nep-for
References: View references in EconPapers View complete reference list from CitEc
Citations:

Forthcoming: Under Review

Downloads: (external link)
https://www.herbert.miami.edu/_assets/files/repec/wp2009-05-kelly-hfm3_1_09.pdf First version, 2009 (application/pdf)

Related works:
Journal Article: Evolution of subjective hurricane risk perceptions: A Bayesian approach (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mia:wpaper:0905

Access Statistics for this paper

More papers in Working Papers from University of Miami, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Daniela Valdivia ().