The notion of optimism or pessimism is defined in the psychology literature in terms of forecasting where the term is used more generally than in statistics. Here we use the theory of loss aversion combined with Bayesian forecasting to propose rather precise definitions of optimism and...

This paper incorporates expectations-based reference-dependent preferences into the canonical Lucas-tree asset-pricing economy. Expectations-based loss aversion increases the equity premium and decreases the consumption-wealth ratio, because uncertain fluctuations in consumption are more...

A key ingredient of many popular asset pricing models is that investors exhibit countercyclical risk aversion, which helps explain major economic puzzles such as the strong and systematic variation in risk premiums over time and the high volatility of asset prices. There is, however,...

The main aim of this study is to describe risk aversion impact on present value. The term risk aversion and the loss risk aversion are considered in this work. Three different models of discounting functions are obtained as a result of these studies. The formal influence of behavioural factors...

The main aim of this study is to describe temporal risk aversion impact on the present value. Here the case of continuous time is considered only. Some initial problem with differential equation is obtained as a result of these studies. Then the discounting function is given as the unique...