Kouwenberg, Roy; Berkelaar, Berkelaar, A.B. - Faculteit der Economische Wetenschappen, Erasmus … - 2000
Prospect theory and loss aversion play a dominant role in behavioral finance. In this paper we derive closed-form solutions for optimal portfolio choice under loss aversion. When confronted with gains a loss averse investor behaves similar to a portfolio insurer. When confronted with losses, the...