Prospect Theory and Asset Prices
نویسندگان
چکیده
We study asset prices in an economy where investors derive direct utility not only from consumption but also from uctuations in the value of their nancial wealth. They are loss averse over these uctuations, and the degree of loss aversion depends on their prior investment performance. We nd that our framework can help explain the high mean, excess volatility, and predictability of stock returns, as well as their low correlation with consumption growth. The design of our model is inuenced by prospect theory and by experimental evidence on how prior outcomes affect risky choice.
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Prospect theory and asset prices pdf
We study asset prices in an economy where investors derive direct utility not. Our model is influenced by prospect theory and by experimental evidence on how.We study asset prices in an economy where investors derive direct utility not. Of our model is influenced by prospect theory and by experimental evidence on.PROSPECT THEORY AND ASSET PRICES Authors: N. The point of this note is to explain ...
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