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The as-is journal review process: Let authors own their ideas
Torgler, Benno; Schmidt, Sascha L.; Frey, Bruno S. - Institut für Volkswirtschaftslehre, … - 2006
In this paper we present a two period model, where the agent's preferences are described by prospect theory as proposed by Kahneman and Tversky. We solve for the agent's portfolio decision. Our findings are that the changes in portfolio weights depend crucially on the reference point and the...
Persistent link: https://www.econbiz.de/10005040821
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Myopic Loss Aversion Revisited: The Effect of Probability Distortions in Choice Under Risk
Blavatskyy, Pavlo; Pogrebna, Ganna - Institut für Volkswirtschaftslehre, …
When the performance of a risky asset is frequently assessed, the probability of detecting a loss is high, which averts the loss averse investors. This effect is known as myopic loss aversion (MLA). This paper reexamines several recent experimental studies documenting the existence of MLA. A...
Persistent link: https://www.econbiz.de/10005627807
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The Power of Positional Concerns
Torgler, Benno; Schmidt, Sascha L.; Frey, Bruno S. - Institut für Volkswirtschaftslehre, … - 2008
People care a great deal about their relative economic position and not solely about their absolute economic position. However, behavioral evidence is rare. This paper provides evidence on how the relative income position affects professional sports performances. Our analysis suggests that if a...
Persistent link: https://www.econbiz.de/10005040820
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Prospect Theory and the CAPM: A contradiction or coexistence?
Levy, Haim; Giorgi, Enrico De; Hens, Thorsten - Institut für Volkswirtschaftslehre, …
Under the assumption of normally distributed returns, we analyze whether the Cumulative Prospect Theory of Tversky and Kahneman (1992) is consistent with the Capital Asset Pricing Model. We find that in every financial market equilibrium the Security Market Line Theorem holds. However, under the...
Persistent link: https://www.econbiz.de/10005585616
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Loss Aversion? Not with Half-a-Million on the Table!
Blavatskyy, Pavlo; Pogrebna, Ganna - Institut für Volkswirtschaftslehre, … - 2006
In the television show Affari Tuoi a contestant is endowed with a sealed box containing a monetary prize between one cent and half a million euros. In the course of the show the contestant is offered to exchange her box for another sealed box with the same distribution of possible monetary...
Persistent link: https://www.econbiz.de/10005585659
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Two Paradigms and Nobel Prizes in Economics: A Contradiction or Coexistence?
Levy, Haim; Giorgi, Enrico De; Hens, Thorsten - Institut für Volkswirtschaftslehre, …
and risk aversion. Kahneman & Tversky suggest Prospect Theory (PT) and Cumulative Prospect Theory (CPT) as an alternative … aversion and maximize the expectation of an S-shaped value function which contains a risk-seeking segment. Employing change of … assumptions of normality and homogeneous expectations, and the S-shaped value function violates the risk aversion assumption. We …
Persistent link: https://www.econbiz.de/10005627938
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Does Prospect Theory Explain the Disposition Effect?
Hens, Thorsten; Vlcek, Martin - Institut für Volkswirtschaftslehre, … - 2006
standard explanation of the disposition effect refers to prospect theory and in particular to the asymmetric risk aversion … according to which investors are risk averse when faced with gains and risk-seeking when faced with losses. We show that for …
Persistent link: https://www.econbiz.de/10005627968
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Rationality on the Rise: Why Relative Risk Aversion Increases with Stake Size
Fehr-Duda, Helga; Bruhin, Adrian; Epper, Thomas; … - Institut für Volkswirtschaftslehre, … - 2007
How does risk tolerance vary with stake size? This important question cannot be adequately answered if framing effects … coherent change in relative risk aversion is observed for losses. The increase in relative risk aversion over gains cannot be …
Persistent link: https://www.econbiz.de/10005756603
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Risk and Rationality: The Effect of Incidental Mood on Probability Weighting
Fehr, Helga; Epper, Thomas; Bruhin, Adrian; Schubert, Renate - Institut für Volkswirtschaftslehre, … - 2007
as cumulative prospect theory. Based on a laboratory experiment with real monetary incentives, we show that incidental …
Persistent link: https://www.econbiz.de/10005756644
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Probability Weighting as Evolutionary Second-best
Herold, Florian; Netzer, Nick - Institut für Volkswirtschaftslehre, … - 2010
The economic concept of the second-best involves the idea that multiple simultaneous deviations from a hypothetical first-best optimum may be optimal once the first-best itself can no longer be achieved, since one distortion may partially compensate for another. Within an evolutionary framework,...
Persistent link: https://www.econbiz.de/10008526715