Static portfolio choice under Cumulative Prospect Theory
نویسندگان
چکیده
منابع مشابه
Static Portfolio Choice under Cumulative Prospect Theory
We derive the optimal portfolio choice for an investor who behaves according to Cumulative Prospect Theory. The study is done in a oneperiod economy with one risk-free asset and one risky asset, and the reference point corresponds to the terminal wealth arising when the entire initial wealth is invested into the risk-free asset. When it exists, the optimal holding is a function of a generalized...
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This paper derives conditions under which the standard decomposition of unconditional expected utility into marginal probabilities and conditional expected utilities generalizes to Cumulative Prospect Theory. The results are relevant for empirical analyses in which marginal probabilities are used as explanatory variables.
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It is well-known that if the parties in a legal dispute agree about the likelihood of potential trial outcomes then they will be inclined to settle vs. going to trial in order to reduce litigation costs and risk. In this paper, we assume that both plaintiff and defendant evaluate this decision in accordance with Cumulative Prospect Theory. It is found that the two parties will sometimes be unab...
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In this paper we compute the asset allocation obtained with different parametrizations of Cumulative Prospect Theory; in this settings, Prospect Theory and Expected Utility are seen as special cases. We first look for the optimal portfolio in an artificial financial market, where the asset returns are generated such that each return is endowed with some desired statistical properties (i.e. the ...
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ژورنال
عنوان ژورنال: Mathematics and Financial Economics
سال: 2009
ISSN: 1862-9679,1862-9660
DOI: 10.1007/s11579-009-0021-2