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Cumulative Prospect Theory and Deferred Annuities [PDF]
Review of Behavioral Finance, 2019 Purpose – Although it has been proved theoretically that annuities can provide optimal consumption during one’s retirement period, retirees’ reluctance to purchase annuities is a long-standing puzzle.
Chen, A., Haberman, S., Thomas, S.
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Risk Aversion in Cumulative Prospect Theory [PDF]
Management Science, 2008 This paper characterizes the conditions for risk aversion in cumulative prospect theory where risk aversion is defined in the strong sense (Rothshild Stiglitz 1970).
Horst Zank, Schmidt, Ulrich
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Gain-Loss Hedging and Cumulative Prospect Theory [PDF]
Mathematical Social Sciences, 2023 Two acts are comonotonic if they yield high payoffs in the same states of nature. The main purpose of this paper is to derive a new characterization of Cumulative Prospect Theory (CPT) through simple properties involving comonotonicity. The main novelty is a concept dubbed gain-loss hedging: mixing positive and negative acts creates hedging ...
Lorenzo Bastianello +2 more
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Cumulative Prospect Theory and the St.Petersburg Paradox [PDF]
Economic Theory, 2006 We find that in cumulative prospect theory (CPT) with a concave value function in gains, a lottery with finite expected value may have infinite subjective value. This problem does not occur in expected utility theory.
Rieger, Marc Oliver, Wang, Mei
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Composite Prospect Theory: A proposal to combine ‘prospect theory’ and ‘cumulative prospect theory’ [PDF]
, 2010 Evidence shows that (i) people overweight low probabilities and underweight high probabilities, but (ii) ignore events of extremely low probability and treat extremely high probability events as certain.
Ali al-Nowaihi, Sanjit Dhami
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Gaussian Cumulative Prospect Theory [PDF]
We propose a novel parametrization of Cumulative Prospect Theory (CPT), as developed by Daniel Kahneman and Amos Tversky, that yields an explicit gamble valuation formula for Gaussian reward distributions. Specifically, we define parametric functions $ v_θ $, $ w^{-}_θ $, and $ w^{+}_θ $ satisfying three key properties.
Médéric Motte
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A Review and Prospect of Cumulative Prospect Theory Research
ACP Official Conference Proceedings, 2022 Eho-Cheng Lo
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Explaining Managerial Incentives for Earnings Manipulation Using Cumulative Prospect Theory (Case Study: Companies Listed in Tehran Stock Exchange) [PDF]
مطالعات تجربی حسابداری مالی, 2021 Prospect theory explains how individuals’ feelings and preferences influence their decision-making. The purpose of this research was to investigate earnings manipulation incentives within companies listed in Tehran Stock Exchange using fourfold pattern ...
Fahime Ebrahimi +2 more
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Tests of Cumulative Prospect Theory with graphical displays of probability [PDF]
Judgment and Decision Making, 2008 Recent research reported evidence that contradicts cumulative prospect theory and the priority heuristic. The same body of research also violates two editing principles of original prospect theory: cancellation (the principle that people delete any ...
Michael H. Birnbaum +2 more
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Cumulative Prospect Theory Portfolio Selection [PDF]
SSRN Electronic Journal, 2020 We introduce elements of Cumulative Prospect Theory into the portfolio selection problem and then compare stock portfolios selected under the behavioral approach with those selected according to classical approaches, such as Mean Variance and Mean Absolute Deviation ones.
Diana Barro +2 more
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