Business Cycle Variation in the Risk-Return Trade-Off

Reference-Dependent Preferences and the Risk-Return Trade-off*

This paper studies the cross-sectional risk-return trade-off in the stock market. A fundamental principle in finance is the positive relation between risk and expected return, whereas recent empirical evidence suggests the opposite. We apply referencedependent preferences to shed light on this violation. Reference-dependent preferences (e.g., prospect theory) typically posit that when facing pr...

Neural foundations of risk-return trade-off in investment decisions

Many decisions people make can be described as decisions under risk. Understanding the mechanisms that drive these decisions is an important goal in decision neuroscience. Two competing classes of risky decision making models have been proposed to describe human behavior, namely utility-based models and risk-return models. Here we used a novel investment decision task that uses streams of (past...

Re-examining the risk–return relationship in Europe: Linear or non-linear trade-off?

Article history: Received 26 July 2012 Received in revised form 24 May 2014 Accepted 26 May 2014 Available online 3 June 2014 This paper analyzes the risk–return trade-off in Europe using recent data from 11 European stock markets. After relaxing the linear assumptions in the risk–return relationship by introducing a new approach that considers the current state of the market, we obtain signifi...

Business Cycle Features In The Iranian Economy

Multi-Objective Evolutionary Algorithms for the Risk-Return Trade-off in Bank Loan Management

Multi-Criteria Decision Making is an increasingly accepted tool for decision making in management. In this work, we highlight the application of a novel Multi-Objective Evolutionary Algorithm, NSGA-II to the risk-return trade-off for a bank loan portfolio manager. The manager of a bank operating in a competitive environment faces the standard goal of maximizing shareholder wealth. Specifically,...