Shedding Light on Human Monetary Decision-Making: Experiments from the Gambling World and Everyday Choices

Open Access
Author:
Henegar, Thomas
Area of Honors:
Finance
Degree:
Bachelor of Science
Document Type:
Thesis
Thesis Supervisors:
  • Brian Spangler Davis, Thesis Supervisor
  • Brian Spangler Davis, Honors Advisor
  • Christoph Hinkelmann, Faculty Reader
Keywords:
  • Sports betting
  • stock market
  • behavioral finance
  • Kahneman
  • Thought experiment
  • loss aversion
  • overconfidence
  • irrational behavior
  • bias
Abstract:
This thesis explores the relationship existing between behavioral finance and sports gambling and the insight it can demonstrate for the stock market and financial assets by shedding light on human monetary decision-making. We observe that, due to human biases, we make irrational and questionable decisions in the face of loss aversion, specifically dealing with human behavior involving spending money. As money allocation for sports betting requires the same processes as money allocation for the financial markets, the psychological influences that cloud our judgment have a presence in both scenarios. The irrationality of humans is evident when looking at economic decisions of different sorts, and only when we remove the biases can we begin to make sound decisions.