1. Introduction -- 2. Risk and Risk Perception: Why we are not Rational in the Face of Risk -- 3. Expected Utility, Prospect Theory, and the Allais Paradox: Why Reference Points are Important -- 4. Confirmation Bias and Anchoring Effect: Why the First Piece of Information is Key in Negotiations...

We investigate the implications of a scarcity of safe assets in a framework in which the safety of an asset is an equilibrium outcome. The intrinsic characteristics and supply of the assets determine their liquidity properties and degree of safeness. The equilibrium can be inefficient even if...

This paper analyzes whether the market portfolio is efficiently related to benchmark portfolios formed on size, value, momentum and reversal with various utility theories by using stochastic dominance criteria. The results support the prospect theory including assumption of loss aversion at...

We analyze the effects of cognitive abilities on two examples of consumer financial decisions where suboptimal behavior is well defined. The first example refers to consumers who transfer the entire balance from an existing credit card account to a new account, but use the new card for...