Decision Making Under Risk: A Prescriptive Approach
نویسنده
چکیده
This article takes the form of a research proposal. The paper seeks to address the problem faced by investors of how best to deal with decision making under risk. The methodology utilizes a normative model from economics—expected utility theory—and a descriptive model from psychology—prospect theory—to formulate a rational but realistic compromise between the two: a prescriptive model of risk preferences. The paper recommends implementing a generic risk metric and a questionnaire for formulating personal risk profiles. The research should be of great interest to both academia and the financial industry.
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