Investment Decisions in a World of Uncertainty

Whether investing in the stock market or in social relations, investors face uncertainty about the consequences of their decisions. How do investors form expectations about the consequences of the choices they have at their disposal? And how do they compose their portfolio or interact with others when they face uncertainty?

Together with her collaborators, Sabine Kröger has investigated these questions experimentally in the context of investments in risky assets and in the context of social interactions between individuals. Her experiments separate two main components of decisions, expectations and preferences, without making the traditional assumption that persons have rational expectations.

The results of these studies provide insights into the distribution of different types of social preferences in a representative population and help evaluate the bias of subjective expectations. They also shed light on methodological issues, such as measuring subjective expectations and incorporating measured expectations into an economic model.

During her stay at CES, Sabine Kröger will investigate the influence of psychological biases on belief formation and point predictions; she will also give a presentation of her work. Ms Kröger’s areas of research include expectation formation and measurement, social preferences and norms, and auction mechanisms. She has published in, amongst others, Econometrica, Journal of Business and Economic Statistics, European Economic Review, Experimental Economics and Journal of Economics Behavior & Organization.

Sabine Kröger is Professor of Economics at Laval University in Québec City, a regular member of the Centre interuniversitairesur le risque, les politiqueséconomiques et l’emploi (CIRPÉE). She holds a PhD from Tilburg University. Before joining Laval University, she was a postdoctoral researcher at the University of Arizona in Tucson.