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Calibrating Behavioral Parameters With Large Language Models

Abstract

Behavioral parameters such as loss aversion, herding, and extrapolation are central to asset pricing models but remain difficult to measure reliably. We develop a framework that treats large language models (LLMs) as calibrated measurement instruments for behavioral parameters. Using four models and 24\{,\}000 agent--scenario pairs, we document systematic rationality bias in baseline LLM behavior,

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