This article, previously published in The Known, the Unknown, and the Unknowable in Financial Risk Management in 2010, looks at how to invest rationally in unknown and unknowable situations and how behavioral finance can shed light on these situations and decisions.
Copyright © 2006 Richard Zeckhauser. Reprinted with permission from The Known, the Unknown, and the Unknowable in Financial Risk Management: Measurement and Theory Advancing Practice, edited by Francis X. Diebold, Neil A. Doherty, and Richard H. Herring (Princeton, NJ: Princeton University Press, 2010).
Editor’s note: An earlier version of this paper appeared as “Investing in the Unknown and Unknowable,” Capitalism and Society, vol. 1, issue 2 (2006): www.bepress.com/cas/vol1/iss2/art5.