RISK AND HEDGING BEHAVIOR: THE ROLE AND DETERMINANTS OF LATENT HETEROGENEITY |
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Authors: | Joost M. E. Pennings Philip Garcia |
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Affiliation: | 1. Maastricht University, Netherlands Wageningen University, Netherlands University of Illinois at Urbana‐Champaign;2. University of Illinois at Urbana‐Champaign |
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Abstract: | The notion of heterogeneous behavior is well grounded in economic theory. Recently it has been shown in a hedging context that the influence of risk attitudes and risk perceptions varies for different segments using a generalized mixture regression model. Here, using recently developed individual risk attitude measurement techniques and experimental and accounting data from investors with differing decision environments, we examine the determinants of heterogeneity in hedging behavior in a concomitant mixture regression framework. Allowing for latent heterogeneity, we find that risk attitudes and risk perceptions do not influence behavior uniformly and that the heterogeneity is influenced by manager's focus on shareholder value and the firm's capital structure. |
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Keywords: | D8 G10 G20 G32 |
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