منابع مشابه
Static Portfolio Choice under Cumulative Prospect Theory
We derive the optimal portfolio choice for an investor who behaves according to Cumulative Prospect Theory. The study is done in a oneperiod economy with one risk-free asset and one risky asset, and the reference point corresponds to the terminal wealth arising when the entire initial wealth is invested into the risk-free asset. When it exists, the optimal holding is a function of a generalized...
متن کاملExaggerated risk: prospect theory and probability weighting in risky choice.
In 5 experiments, we studied precautionary decisions in which participants decided whether or not to buy insurance with specified cost against an undesirable event with specified probability and cost. We compared the risks taken for precautionary decisions with those taken for equivalent monetary gambles. Fitting these data to Tversky and Kahneman's (1992) prospect theory, we found that the wei...
متن کاملPortfolio Choice Under Cumulative Prospect Theory: An Analytical Treatment
We formulate and carry out an analytical treatment of a single-period portfolio choice model featuring a reference point in wealth, S-shaped utility (value) functions with loss aversion, and probability weighting under Kahneman and Tversky’s cumulative prospect theory (CPT). We introduce a new measure of loss aversion for large payoffs, called the large-loss aversion degree (LLAD), and show tha...
متن کاملFeedback produces divergence from prospect theory in descriptive choice.
A recent study demonstrated that individuals making experience-based choices underweight small probabilities, in contrast to the overweighting observed in a typical descriptive paradigm. We tested whether trial-by-trial feedback in a repeated descriptive paradigm would engender choices more correspondent with experiential or descriptive paradigms. The results of a repeated gambling task indicat...
متن کاملUsing Prospect Theory to Explain Anomalous Crop Insurance Coverage Choice
Farmers’ decisions about how much crop insurance to buy are not generally consistent with either expected profit or utility maximization. They do not pick coverage levels that maximize expected subsidy nor do they demand full insurance coverage. In addition, the absolute size ...
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ژورنال
عنوان ژورنال: Journal of Applied Economics
سال: 2014
ISSN: 1514-0326,1667-6726
DOI: 10.1016/s1514-0326(14)60006-4