Risk Seeking

Organised by: RCE 4 (Data Analytics and Modelling)

 Presentation Title: Risk Seeking

Time and Date: 14:00 - 16:00, Friday, 6 December 2024 (Beijing time)

Language: English

Onsite location: BS 3114

Abstract: People are risk-seeking in certain situations, though they are normally risk-averse. The loss aversion utility function provides such an example. Risk seeking is largely understudied, probably because it usually does not allow optimal choices and are not tractable. In this paper, we study the implications when risk seeking is incorporated into the agent's preferences. We show that risk seeking dramatically alters the agent's behaviors in stressed scenarios. It is optimal to take large long or short positions and shun positions involving moderate levels of risk. The agent can swing between sizable long and short positions with minor changes in market conditions. The agent may short an asset with a positive risk premium. These behaviors are consistent with findings in experimental and market settings but cannot be explained by risk-averse preferences.

Presenter: Dr. Kai Li, Macquarie University

Dr. Kai Li is a Senior Lecturer at the Department of Applied Finance, Macquarie University, Australia. His research covers asset pricing, financial market modeling, and financial economics. He has published in top journals such as Management Science, Operation Research, Journal of Economic Theory, Journal of Banking and Finance, Journal of Economic Dynamics and Control, and Journal of Economic Behavior and Organizations. He has been awarded competitively Australian and Chinese research grants, including Australian Research Council (ARC) and National Natural Science Foundation of China (NSFC).