Until the Bitter End: On Prospect Theory in a Dynamic Context

We provide a result on prospect theory decision makers who are naïve about the time inconsistency induced by probability weighting. If a market offers a sufficiently rich set of investment strategies, investors postpone their trading decisions indefinitely due to a strong preference for skewness. We conclude that probability weighting in combination with naïveté leads to unrealistic predictions for a wide range of dynamic setups. (JEL D81, G02, G11)

MoreLess

Year of publication:	2015
Authors:	Ebert, Sebastian ; Strack, Philipp
Published in:	American Economic Review. - American Economic Association - AEA. - Vol. 105.2015, 4, p. 1618-33
Publisher:	American Economic Association - AEA

Online Resource

Check full text access |

More access options

www.aeaweb.org

Check Google Scholar

In German libraries (KVK)

I need help

More details

Extent:	application/pdf application/zip
Type of publication:	Article
Notes:	DOI: 10.1257/aer.20130896
Classification:	D81 - Criteria for Decision-Making under Risk and Uncertainty ; g02 ; G11 - Portfolio Choice
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10011211797