Probability weighting, stop-loss and the disposition effect
نویسندگان
چکیده
منابع مشابه
Second-best Probability Weighting∗
Non-linear probability weighting is an integral part of descriptive theories of choice under risk such as prospect theory. But why do these objective errors in information processing exist? Should we try to help individuals overcome their mistake of overweighting small and underweighting large probabilities? In this paper, we argue that probability weighting can be seen as a compensation for pr...
متن کاملInverse probability weighting.
Statistical analysis usually treats all observations as equally important. In some circumstances, however, it is appropriate to vary the weight given to different observations. Well known examples are in meta-analysis, where the inverse variance (precision) weight given to each contributing study varies, and in the analysis of clustered data. Differential weighting is also used when different p...
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A probability weighting function w(p) for an objective probability p in decision under risk plays a pivotal role in Kahneman-Tversky’s prospect theory. Although recent studies in econophysics and neuroeconomics widely utilized probability weighting functions, psychophysical foundations of the probability weighting functions have been unknown. Notably, a behavioral economist Prelec (1998) axioma...
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Generally, international flows of capital and foreign direct investment attraction are challengeable issues in the literature of economic growth and development in emerging market countries. However, the fluctuations in foreign direct investment, including sudden flood and stop, will affect emerging markets' output and macroeconomic variables. Using an econometric model with unbalanced panel da...
متن کاملModeling Gain-Loss Asymmetries in Risky Choice: The Critical Role of Probability Weighting
A robust empirical regularity in decision making is that the negative consequences of an option (i.e., losses) often have a stronger impact on people’s behavior than the positive consequences (i.e., gains). One common explanation for such a gain-loss asymmetry is loss aversion. To model loss aversion in risky decisions, prospect theory (Kahneman & Tversky, 1979) assumes a kinked value function ...
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ژورنال
عنوان ژورنال: Journal of Economic Theory
سال: 2018
ISSN: 0022-0531
DOI: 10.1016/j.jet.2018.10.002