m-sophistication

The m-sophistication of a finite binary string x is introduced as a generalization of some parameter in the proof that complexity of complexity is rare. A probabilistic near sufficient statistic of x is given which length is upper bounded by the m-sophistication of x within small additive terms. This shows that m-sophistication is lower bounded by coarse sophistication and upper bounded by sophistication within small additive terms. It is also shown that m-sophistication and coarse sophistication can not be approximated by an upper or lower semicomputable function, not even within very large error.Comment: 13 pages, draf

Learning Strategic Sophistication

We experimentally investigate coordination games in which cognition plays an important role, i.e. where outcomes are affected by the agents level of understanding of the game and the beliefs they form about each others understanding.We ask whether and when repeated exposure permits agents to learn to improve cognition in a strategic setting.We find evidence for strategic sophistication being learned, generalized and promoted.Agents acquire strategic sophistication in simple settings.They may fail to do so in similar but more demanding settings.Given the opportunity, they transfer learning from the simple to the more demanding task.There is heterogeneity in sophistication.We find some evidence for sophisticated agents trying to spread sophistication early in the game, provided there is a long enough time horizon.noncooperative games;laboratory group behavior

Time Inconsistency, Sophistication, and Commitment An Experimental Study

We experimentally study the relationship between time inconsistency, sophistication about time inconsistency, and self-commitment. Previous research has interpreted demand for commitment devices as evidence for the sophistication of a time-inconsistent decision-maker. In our laboratory experiment, we attempt to measure sophistication directly by way of a cognitive test. We then test the hypothesis that people who are both time-inconsistent and show high cognitive capacity take up commitment devices when offered in the strategic game between their current and their future self. For experimental laboratory commitment choices, we cannot detect a moderating effect of cognition on commitment demand of time-inconsistent subjects. However, we find that the existence of time-inconsistent preferences and sophistication (proxied by cognitive performance) can predict the demand for savings commitment in our hypothetical survey vignette question.Series: Department of Strategy and Innovation Working Paper Serie

Does sophistication affect long-term return expectations? : Evidence from financial advisers' exam scores

We use unique data from financial advisers’ professional exam scores and combine it with other variables to create an index of financial sophistication. Using this index to explain long-term stock return expectations, we find that more sophisticated financial advisers tend to have lower return expectations. A one standard deviation increase in the sophistication index reduces expected returns by 1.1 percentage points. The effect is stronger for emerging market stocks (2.3 percentage points). The sophistication effect contributes 60% to the model fit, while employer fixed effects combined contribute less than 30%. These results help understand the formation of potentially excessively optimistic expectations

Probabilistic sophistication and multiple priors.

We show that under fairly mild conditions, a maximin expected utility preference relation is probabilistically sophisticated if and only if it is subjective expected utility.

The age of reason: financial decisions over the lifecycle

The sophistication of financial decisions varies with age: middle-aged adults borrow at lower interest rates and pay fewer fees compared to both younger and older adults. We document this pattern in ten financial markets. The measured effects cannot be explained by observed risk characteristics. The sophistication of financial choices peaks around age 53 in our cross-sectional data. Our results are consistent with the hypothesis that financial sophistication rises and then falls with age, although the patterns that we observe represent a mix of age effects and cohort effects.Financial institutions ; Loans

UNLV Highlights

Sponsored program funding serves as one indication of research growth and sophistication