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A Probability Weighting Function for Cumulative Prospect Theory and Mean-Gini Approach to Optimal Portfolio Investment

Blavatskyy, Pavlo R. - 2014

This paper presents a new two-parameter probability weighting function for Tversky and Kahneman (1992) cumulative prospect theory as well as its special cases — Quiggin (1981) rank-dependent utility and Yaari (1987) dual model. The proposed probability weighting function can be inverse...

Persistent link: https://www.econbiz.de/10013060674

Estimating ambiguity aversion in a portfolio choice experiment

Ahn, David S.; Choi, Syngjoo; Gale, Douglas; Kariv, Shachar - In: Quantitative economics : QE ; journal of the … 5 (2014) 2, pp. 195-223

We report a portfolio-choice experiment that enables us to estimate parametric models of ambiguity aversion at the …

Persistent link: https://www.econbiz.de/10011757224

Measuring Loss Aversion under Ambiguity : A Method to Make Prospect Theory Completely Observable

Abdellaoui, Mohammed - 2016

new tests of prospect theory. We implemented our method in an experiment and obtained support for prospect theory. Utility …

Persistent link: https://www.econbiz.de/10013007231

The Bull of Wall Street : Experimental Analysis of Testosterone and Asset Trading

Nadler, Amos - 2017

Growing evidence shows that biological factors affect individual financial decisions that could be reflected in financial markets. Testosterone, a chemical messenger especially influential in male physiology, has been shown to affect economic decision making, and is taken as a...

Persistent link: https://www.econbiz.de/10012972194

Decision-Making Under Risk : When Is Utility Maximization Equivalent To Risk Minimization?

Ruscitti, Francesco; Dubey, Ram Sewak; Laguzzi, Giorgio - 2023

We consider a standard one-agent decision-making problem under risk and we address the following question: under what conditions is utility maximization equivalent to 'risk' minimization, where the measure of risk used by the decision-maker is a conservative coherent risk measure?

Persistent link: https://www.econbiz.de/10014263940

Narrative Decision-Making in Investment Choices : How Investors Use News About Company Performance

Johnson, Samuel - 2017

quotation (Experiment 1), as though they are using affectively laden information to predict the ending of a story. Importantly … predictions had downstream consequences for asset allocation choices (Experiment 2) and these choices were driven in part by … affective reactions to the company performance news (Experiment 3). These results could not be explained either by expectations …

Persistent link: https://www.econbiz.de/10012947776

Rational overconfidence and social security

Krabbe Nielsen, Carsten - 2014

Is an assumption of bounded rationality needed to explain Social Security and other mandatory pension plans? In this … by behavioral economics. This methodology does not deviate from the neoclassical assumption of rationality but only …

Persistent link: https://www.econbiz.de/10011774418

Optimal asset allocation under quadratic loss aversion

Fortin, Ines; Hlouskova, Jaroslava - 2012

We study the asset allocation of a quadratic loss-averse (QLA) investor and derive conditions under which the QLA problem is equivalent to the mean-variance (MV) and conditional value-at-risk (CVaR) problems. Then we solve analytically the two-asset problem of the QLA investor for a risk-free...

Persistent link: https://www.econbiz.de/10009684025

Behavioral Aspects of Household Portfolio Choice : Effects of Loss Aversion on Life Insurance Uptake and Savings

Hwang, In Do - 2017

This paper investigates how loss-aversion affects individuals' decisions on savings and insurance purchase. Specifically, this paper empirically tests if prospect theory's loss aversion decreases insurance demand and increases savings demand. Prospect theory predicts that boundedly rational...

Persistent link: https://www.econbiz.de/10012962197

History-dependent risk preferences : evidence from individual choices and implications for the disposition effect

Andrikogiannopoulou, Angie; Papakonstantinou, Filippos - 2015 - June 2015

Using trading data from a sports-wagering market, we estimate individuals' dynamic risk preferences within the prospect-theory paradigm. This market's experimental-like features facilitate preference estimation, and our long panel enables us to study whether preferences vary across individuals...

Persistent link: https://www.econbiz.de/10011296081

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