Realization Utility with Reference-Dependent Preferences

نویسنده

  • Jonathan E. Ingersoll
چکیده

We develop a tractable model of realization utility that studies the role of referencedependent S-shaped preferences in a dynamic investment setting with reinvestment. Our model generates both voluntarily realized gains and losses. It makes specific predictions about the volume of gains and losses, the holding periods, and the sizes of both realized and paper gains and losses that can be calibrated to a variety of statistics, including Odean’s measure of the disposition effect. Our model also predicts several anomalies, including, among others, the flattening of the capital market line and a negative price for idiosyncratic risk. (JEL G02, G11, G12)

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تاریخ انتشار 2012