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Documenting the functional form of dynamic risk‐taking behaviour in a real options context using sporting contests
Author(s) -
Easton Stephen,
Pinder Sean,
Stern Steven
Publication year - 2018
Publication title -
accounting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.645
H-Index - 49
eISSN - 1467-629X
pISSN - 0810-5391
DOI - 10.1111/acfi.12298
Subject(s) - interim , extant taxon , cricket , competition (biology) , ball (mathematics) , context (archaeology) , economics , econometrics , actuarial science , mathematics , political science , geography , ecology , mathematical analysis , evolutionary biology , law , biology , archaeology
Changes in risk‐taking behaviour based on interim performance are examined in high‐stakes competition. A real options framework is used to provide a richer characterisation of risk‐taking behaviour than examined in extant studies. This framework is applied to an examination of ball‐by‐ball data from 1207 cricket matches. Consistent with modelled expectations, risk taking is found to increase (decrease) at a decreasing rate following below par (above par) interim performance. This result is especially strong in situations where the resources remaining are low, a result predicted by the real options model.