Finance Seminar Michael Ungeheuer

In today’s Finance Seminar, Michael Ungeheuer from Aalto University presented „A Cognitive Foundation for Perceiving Uncertainty.“ He showed how cognitive constraints—limited attention and imperfect recall—shape how investors perceive risk. When learning outcomes simultaneously, investors overweight rare events, but when learning sequentially, they underweight them, leading to a 40-percentage-point shift in asset preferences. To test this, Michael and his co-authors designed experiments manipulating attention and memory, providing new insights into belief formation and investment behavior.