My research interests are related to judgment and decision making, in particular to risk perception and acceptance. The most recent projects focus on: (1) the perceived relation between costs and benefits in risk judgments, and (2) Investment decisions and market trends. In contrast to the assumption of an irrational investor, which was adopted in a majority of previous research in behavioral economics, this project is founded on Simon’s concept of bounded rationality and satisficing. According to this concept, rational choice means that individuals pursue their goals. Our additional assumption is that goals are set according to market trends and general economy. During strong economy and bull market investors driven by the objective of increasing their wealth focus on not loosing an opportunity. In contrast, during weak economy and bear market, investors driven by the need to build a financial safety buffer have low aspirations and focus on not falling below their security level. Following different objectives, investors use different strategies.
These assumptions lead to investigating models that include aspirations. This, in turn, implies that risk attitudes should be discussed in terms of probability weighting rather than in terms of the Arrow-Pratt proposition. This type of approach was rarely studied in the previous research.This research program consists of both laboratory and field studies.
To study these issues, different research techniques ranging from interviews to experiments, and process tracing have to be used. For example, the data about signals used to diagnose market trends will be collected in interviews with investors and dealers. Since we want to study reactions of investors to market trends, it is necessary to include process-tracing techniques (e.g., MouseLab), which have been rarely applied in behavioral economics. To compare experimental data with actual behavior we will analyze long-term statistical market data, such as total and short sell volume, the number of trade orders, the fraction of limit orders and small orders, as well as the structure of volume (e.g. switching from Alpha to Beta stocks).
An important advantage of the proposed methodology is that all techniques used will be integrated into the GEx software, which enables to use each technique to collect data either online or offline. The GEx software was created by one of the authors of this project on the basis of his past experience in conducting many psychological experiments and surveys online.
The normative and behavioral models of investment strategies will be fitted to the respondents risk rates and choices collected in the above studies and to actual investments. L-BFGS-B, a code for solving large nonlinear optimization problems with simple bounds on the variables will be used. This method was previously successfully applied by the authors to fit models of risk judgment and of a risky choice to experimental data.
Scopus Author ID: 6701818125
- Judgment and Decision Making
- Motivation, Goal Setting
- Organizational Behavior
- Personality, Individual Differences
- Michalaszek, A., & Sokolowska, J. (2010). The relative input of payoffs and probabilities into risk judgment. Polish Psychological Bulletin, 41(2), 46-51, DOI: 10.2478/v10059-010-0006-2
- Sokolowska, J. (2006). Risk perception and acceptance -- one process or two? The impact of aspirations on perceived risk and preferences. Experimental Psychology, 53(4), 247-259, DOI: 10.1027/1618-3220.127.116.11.
- Sokolowska, J. (2004). Risk as a primitive in decision (editorial). Polish Psychological Bulletin, 35(3), 131-133.
- Sokolowska, J. & Klonowicz T. (2004) Risk perception, risk acceptance and dispositional optimism. Polish Psychological Bulletin, 35(1), 55-63.
- Sokolowska, J., & Pohorille A. (2004). How information about probabilities and pay-offs is combined in risk judgment ? Polish Psychological Bulletin, 35(3), 141-152.
- Sokolowska, J., & Pohorille, A. (2000). Models of risk and choice: Challenge or danger? Acta Psychologica, 104, 339-369.
- Sokolowska, J., Sleboda, P. (2015) The Inverse Relation between Risks and Benefits: The Role of Affect and Expertise. Risk Analysis, 35 (7), 1252-12-67.
- Economic Psychology
- Psychological Decision Theory
- Risk Perception and Acceptance