What does it take for a specific prospect theory type household to engage in risky investment?

This research note examines the conditions which will induce a prospect theory type investor, whose reference level is set by 'playing it safe', to invest in a risky asset. The conditions indicate that this type of investor requires a large equity premium to invest in risky assets. However, once she does invest because of a large risk premium, she becomes aggressive and buys/sells till an externally imposed upper/lower bound is reached.

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Year of publication:	2012
Authors:	Hlouskova, Jaroslava ; Tsigaris, Panagiotis
Publisher:	Vienna : Institute for Advanced Studies (IHS)
Subject:	prospect theory \| loss aversion \| reference level \| non-investment in risky assets

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Series:	Reihe Ökonomie / Economics Series ; 286
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	734133081 [GVK] hdl:10419/68502 [Handle] RePEc:ihs:ihsesp:286 [RePEc]
Classification:	D1 - Household Behavior and Family Economics ; D8 - Information and Uncertainty ; G1 - General Financial Markets
Source:	EconStor

Persistent link: https://www.econbiz.de/10010290978