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Advances in Prospect Theory: Cumulative Representation of Uncertainty
- JOURNAL OF RISK AND UNCERTAINTY, 5:297-323 (1992)
, 1992
"... We develop a new version of prospect theory that employs cumulative rather than separable decision weights and extends the theory in several respects. This version, called cumulative prospect theory, applies to uncertain as well as to risky prospects with any number of outcomes, and it allows differ ..."
Abstract
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Cited by 1717 (17 self)
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We develop a new version of prospect theory that employs cumulative rather than separable decision weights and extends the theory in several respects. This version, called cumulative prospect theory, applies to uncertain as well as to risky prospects with any number of outcomes, and it allows
Prospect theory: An analysis of decisions under risk
- Econometrica
, 1979
"... Your use of the JSTOR archive indicates your acceptance of JSTOR's Terms and Conditions of Use, available at ..."
Abstract
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Cited by 6312 (30 self)
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Your use of the JSTOR archive indicates your acceptance of JSTOR's Terms and Conditions of Use, available at
Prospect Theory for continuous distrbutions
, 2006
"... Prospect Theory for continuous distrbutions ..."
Prospect theory and asset prices
- Quarterly Journal of Economics
, 2001
"... We study asset prices in an economy where investors derive direct utility not only from consumption but also from fluctuations in the value of their financial wealth. They are loss averse over these fluctuations, and the degree of loss aversion depends on their prior investment performance. We find ..."
Abstract
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Cited by 121 (2 self)
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that our framework can help explain the high mean, excess volatility, and predictability of stock returns, as well as their low correlation with consumption growth. The design of our model is influenced by prospect theory and by experimental evidence on how prior outcomes affect risky choice. I.
Composition Rules in Prospect Theory
, 2003
"... Abstract: Original and cumulative prospect theory differ in the composition rule used to combine the probability weighting function and the value function. We test these composition rules by performing a novel test. We apply estimates of prospect theory’s weighting and value function obtained from t ..."
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Abstract: Original and cumulative prospect theory differ in the composition rule used to combine the probability weighting function and the value function. We test these composition rules by performing a novel test. We apply estimates of prospect theory’s weighting and value function obtained from
Prospect Theory for continuous distrbutions
, 2006
"... Prospect Theory is a widely accepted descriptive framework to model decisions under risk. However, it is limited to situations with finitely many outcomes. Moreover, it is discontinuous, i.e., small changes in a lottery can produce large differences in its utility, contrary to experiments. In this a ..."
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Prospect Theory is a widely accepted descriptive framework to model decisions under risk. However, it is limited to situations with finitely many outcomes. Moreover, it is discontinuous, i.e., small changes in a lottery can produce large differences in its utility, contrary to experiments
Third-generation prospect theory
, 2008
"... ... prospect theory (PT³). This retains the predictive power of previous versions of prospect theory, but extends that theory by allowing reference points to be uncertain while decision weights are specified in a rank-dependent way. We show that PT 3 preferences respect a state-conditional form of s ..."
Abstract
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Cited by 19 (2 self)
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... prospect theory (PT³). This retains the predictive power of previous versions of prospect theory, but extends that theory by allowing reference points to be uncertain while decision weights are specified in a rank-dependent way. We show that PT 3 preferences respect a state-conditional form
‘prospect theory’and ‘cumulative prospect theory’
, 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. The main alternative decision theories, rank dependent utility (RDU) and cumulative prospect the ..."
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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. The main alternative decision theories, rank dependent utility (RDU) and cumulative prospect
Prospect Theory and Higher Moments
, 2006
"... The paper relates cumulative prospect theory to the moments of returns distributions, e.g. skewness and kurtosis, assuming returns are normal inverse Gaussian distributed. The normal inverse Gaussian distribution parametrizes the first- to forth-order moments, making the investigation straightforwar ..."
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Cited by 3 (0 self)
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The paper relates cumulative prospect theory to the moments of returns distributions, e.g. skewness and kurtosis, assuming returns are normal inverse Gaussian distributed. The normal inverse Gaussian distribution parametrizes the first- to forth-order moments, making the investigation
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