Suchergebnisse

We study the asset allocation of an investor with prospect theory (PT) preferences. First, we solve analytically the two-asset problem of the PT investor for one risk-free and one risky asset and find that loss aversion and the reference return affect differently less ambitious investors and more ambitious investors. Second, we empirically investigate the performance of a PT portfolio when diversifying among a stock market index, a government bond and gold, in Europe and the US. We focus on investors with PT preferences under different scenarios regarding the reference return and the degree of loss aversion and compare their portfolio performance with the performance of investors under CVaR, risk neutral, linear loss averse and in particular mean-variance (MV) preferences. We find that, in the US, PT portfolios significantly outperform (in terms of returns) mean-variance portfolios in the majority of cases. Also with respect to riskadjusted performance, PT investment outperforms MV investment in the US. Similar results, however, can not be observed in Europe. Finally, we analyze asymmetric effects along economic uncertainty and observe that PT investment leads to higher returns than MV investment in times of larger economic uncertainty, especially in the US.

We study the asset allocation of an investor with prospect theory (PT) preferences. First, we solve analytically the two-asset problem of the PT investor for one risk-free and one risky asset and find that loss aversion and the reference return affect differently less ambitious investors and more ambitious investors. Second, we empirically investigate the performance of a PT portfolio when diversifying among a stock market index, a government bond and gold, in Europe and the US. We focus on investors with PT preferences under different scenarios regarding the reference return and the degree of loss aversion and compare their portfolio performance with the performance of investors under CVaR, risk neutral, linear loss averse and in particular mean-variance (MV) preferences. We find that, in the US, PT portfolios signiffcantly outperform (in terms of returns) mean-variance portfolios in the majority of cases. Also with respect to riskadjusted performance, PT investment outperforms MV investment in the US. Similar results, however, can not be observed in Europe. Finally, we analyze asymmetric effects along economic uncertainty and observe that PT investment leads to higher returns than MV investment in times of larger economic uncertainty, especially in the US.

Risk is a central feature of political decision making. Prospect theory, an empirically correct theory of choice under risk that deals precisely with this condition, therefore seems to have much to offer political science. Prospect theory's central finding is that individuals' attitude toward risk depends on whether they face losses or gains. Confronting gains, individuals are risk averse in their decision making; confronting losses, they are risk accepting. Where do these preferences come from? Do they also hold for collective decision making? How can prospect theory help us to solve puzzles in political science? This article addresses these questions by discussing some advances in evolutionary biology, behavioural economics, psychology, neuro-economics and political science. The article shows that there is increasing evidence that prospect theory preferences have an evolutionary origin and that these preferences extend to collective decision making. Moreover, it demonstrates that political science can indeed gain from applying prospect theory, as insights from prospect theory help to solve puzzles such as why some governments pursue electorally risky welfare state reform but others do not. © 2011 The Author. Political Studies Review © 2011 Political Studies Association.

Land auction is widely practiced in company and government decisions, especially in China. Bidders are always faced with two or more auctions in the period of a decision cycle. The outcome of the auction is under high risk. The bidder's risk attitude and preference will have a great influence on his/her bidding price. Prospect theory is currently the main descriptive theory of decision under risk. In this paper, we will consider the preferences of the decision-makers in land bidding decisions with the multi-attribute additive utility and reference point method in cumulative prospect theory. Three land auction models are proposed based on the appearance time of the land auctions. The simultaneous model uses cumulative prospect theory without considering the relationships between the auctions. The time sequential model involves the exchange auction decisions at different time with the third-generation prospect theory. The event sequential model further considers the reference point prediction in sequential land auction decisions. The three models can help the decision-makers make better bidding price decision when they are faced with several land auctions in the period of a decision cycle. A case study illustrates the processes and results of our approaches.

To understand how people behave in an uncertain world - and to make viable recommendations about how the law should try to shape that behavior - legal scholars must employ a model or theory of decision making. Only with an understanding of how people are likely to respond to legal rules can legal scholars, judges, legislators, and regulators craft rules that are likely to encourage desirable behavior and discourage undesirable behavior. Rather than rely on rational choice theory, behavioral law and economics scholars (or legal decision theorists) have turned to Daniel Kahneman and Amos Tversky's "prospect theory" to inform their analyses of law and legal behavior. Prospect theory contains several empirical propositions relevant to legal analysis, but this paper focuses primarily on prospect theory's insight that people often make risk-averse choices when selecting between "gains" and risk-seeking choices when selecting between "losses." The paper surveys efforts in the legal literature to use this insight to inform the way legal scholars think about law and behavior in several doctrinal areas. The paper acknowledges some limitations associated with this work (e.g., external validity, differences in individual decision making, differences in group vs. individual decision making), but it concludes that prospect theory is nonetheless a valuable tool for legal scholars and policy makers.

There is widespread agreement about a combination of attributes that someone needs to possess if they are to be counted as a conservative. They need to lack definite political ideals, goals or ends, to prefer the political status quo to its alternatives, and to be risk averse. Why should these three highly distinct attributes, which are widely believed to be characteristic of adherents to a significant political position, cluster together? Here I draw on prospect theory to develop an explanation for the clustering of attributes that is characteristic of conservatives. I argue that a lack of political ideals is the underlying driver of conservatism. I will provide reason to believe that people who lack political ideals are disposed to prefer the political status quo to its alternatives; and reason to believe that people who prefer the political status quo to its alternatives are disposed to be risk averse, at least with respect to significantly many of the risks that arise in the social and political domain. I also consider and reject some other potential explanations for the clustering of attributes that is characteristic of conservatives and sketch some policy implications that follow from the explanation I develop.

Incudes bibliographical references (p. 225-232) and index. ; Introduction -- Prospect theory -- The Iranian hostage rescue mission -- The decisions about admitting the Shah -- The U-2 crisis -- The 1956 Suez crisis -- Conclusions. ; Mode of access: Internet.

We investigated whether and how firms' toxic chemical releases (TCRs) affect idiosyncratic return volatility (IRV) using a prospect theory lens. Utilising a large sample of US public listed firms over the period 2001–2018, we find a significant and positive association between TCRs and IRV, suggesting that firms releasing more toxic chemicals have higher IRV. Additional analyses show that a positive association between TCR and IRV is more evident among firms with (i) high revenue, (ii) lower financial constraints and (iii) fewer environmental violations. A further test also suggests that a positive association between TCRs and IRV is contingent on political leadership ideology and market states. Our results remain consistent with weighted TCRs, IRV based on the Fama–French three-factor model, fixed-effect two-stage least square estimator (FE-2SLS), and other robustness checks. These findings shed light on the role of equity markets as a driver for capital-intensive pollution abatement activities and enhanced compliance with environmental laws, standards and best practices.

How much mileage can we get out of prospect theory to explain foreign policy decision-making? To answer this question, we first argue that risk as outcome uncertainty is the appropriate definition in prospect-theoretical applications. Then, we indicate that probability weighting—a crucial component of prospect theory—is typically ignored in such applications. We argue why this is problematic and suggest how to move forward. Next, we discuss how to establish the reference point in the face of outcomes in multiple dimensions, as is typically the case in foreign policy decision-making. Finally, we discuss what we have learnt regarding prospect theory's scope conditions and the differences across individuals in the theory's applicability. Overall, our contribution lies in identifying several underexposed or neglected issues (e.g., the definition of risk and probability weighting), in examining the advancements regarding prospect theory's scope conditions, and in discussing avenues for further research.

Small local governmental units are responsible for allocating resources on behalf of a substantial portion of all United States citizens. The research reported here investigates the effects of presentation format (or framing) on decision preference in a governmental resource allocation context. The subjects represent a population of governmental units which has not received prior research attention--small local governments. Budget preparers were asked to choose among objectively identical alternatives, which differed in presentation formats. The cases used to investigate the effects of presentation were modelled after Kahneman and Tversky's (1979) seminal work in prospect theory, which addressed violations of expected utility theory. The survey's approximately 50% response rate provided results indicating that the subjects of this study cannot be considered "rational decision makers" as defined by the well accepted expected utility theory. However, most of their decision behavior could be explained with the concepts of prospect theory. The implications of this research include the need for further investigation of the resource allocation process of small local governments. Future research should focus on development of a resource allocation system which is not prone to manipulation as a result of the mere presentation of the decision problem and its alternatives. The fact that approximately 25% of the United States population is served by these small governments suggests the need for continued research. ; Source: Dissertation Abstracts International, Volume: 50-08, Section: A, page: 2558. ; Director: Nicholas G. Apostolou. ; Thesis (Ph.D.)--Louisiana State University and Agricultural & Mechanical College, 1989.

We develop a model of one representative agent and one asset. The agent evaluates the earnings according to Prospect Theory and he does not know exactly the stochastic process generating earnings. While the earnings are generated by a random walk process, the agent considers a Markovian process, according to which firm's earnings move between two regimes, represented by a mean-reverting process and a trend process, as in Barberis, Shleifer and Vishny (1998). We study how an agent who is loss averse evaluates the price of a stock when she takes into account the wrong stochastic process. This twofold departure from rationality determines permanent effects on stock prices, even in long run. First, the model shows that agent who evaluates the asset according to Prospect Theory consistently underestimates the asset, due to loss aversion bias. This is shown under two different assumption regarding the functional form of utility. A kinked linear utility function (as in Bernatzi and Thaler, 1985) and the original and more general specification of Kahneman and Tversky (1979) are used. The model allows to explain observed phenomenon in the cross-section earnings return distribution. We solve this model and according to Barberis et all (1998), we evaluate the framework by using artificial data sets of earnings and prices simulated from the model. For plausible range of parameter values, it generates the empirical predictions of overreaction and underreaction observed in the data are explained.

A significant concern in healthcare is that of patient privacy and how organizations protect against unauthorized access to protected health information. The federal government has responded by instituting policies and guidelines on requirements for protection. However, the policy language leaves areas open to interpretation by those following the guidelines. Reporting to the Office for Civil Rights and/or the patient can open an organization to risk of financial and possible criminal penalties. There is a risk of harm to their reputation which could impact patient visits and market share. Therefore, Privacy Officers might view risk in different ways and therefore handle breach reporting differently. Privacy Officers are responsible for determining an individual organization's breach reportability status. Their processes may vary dependent on their knowledge of the policy, the status of previous reported breaches, and their framing of an incident. This research aims to explore the following factors: (1) personal and organizational knowledge, (2) prior breach status, (3) and scenario framing, to explore if Prospect Theory is applicable to the choices a Privacy Officer makes regarding breach determination. The study uses primary data collection through a survey that includes loss and gain scenarios in accordance with Prospect Theory. Individuals listed as Privacy Officers within the American Health Information Management Association (AHIMA) were the target audience for the survey. Univariate, Bivariate, Multivariate, and Post Regression techniques were used to analyze the data collected. The findings of the study supported the theoretical framework and provided industry and public affairs implications. These findings show that there is a gap where Privacy Officers have to make their own decisions and there is a difference in the types of decisions they are making on a day to day basis. Future guidance and policies need to address these gaps and can use the insight provided by this study. ; 2018-12-01 ; Ph.D. ; Community Innovation and Education, Dean's Office CCIE ; Doctoral ; This record was generated from author submitted information.

Background and Objectives Common health state valuation methodology, such as time tradeoff (TTO) and standard gamble (SG), is typically applied under several descriptively invalid assumptions, for example, related to linear quality-adjusted life years (QALYs) or expected utility (EU) theory. Hence, the current use of results from health state valuation exercises may lead to biased QALY weights, which may in turn affect decisions based on economic evaluations using such weights. Methods have been proposed to correct responses for the biases associated with different health state valuation techniques. In this article we outline the relevance of prospect theory (PT), which has become the dominant descriptive alternative to EU, for health state valuations and economic evaluations. Methods and Results We provide an overview of work in this field, which aims to remove biases from QALY weights. We label this "the corrective approach." By quantifying PT parameters, such as loss aversion, probability weighting, and nonlinear utility, it may be possible to correct TTO and SG responses for biases in an attempt to produce more valid estimates of preferences for health states. Through straightforward examples, this article illustrates the effects of this corrective approach and discusses several unresolved issues that currently limit the relevance of corrected weights for policy. Conclusions Suggestions for research addressing these issues are provided. Nonetheless, if validly corrected health state valuations become available, we argue in favor of using these in economic evaluations.

Multiple experts decision-making (MEDM) can be regarded as a situation where a group of experts are invited to provide their opinions by evaluating the given alternatives, and then select the optimal alternative(s). As a useful linguistic expression model, linguistic preference orderings (LPOs) were established in which the order of alternatives and the relationships between two adjacent alternatives are fused well. Considering that prospect theory has the superiority in depicting risk attitudes (risk seeking for losses and risk aversion for gains) during the uncertain decision-making process, this paper develops a consensus model based on prospect theory to deal with MEDM problems with LPOs. Firstly, each LPO provided by expert is transformed into the responding DHLPR with complete consistency. Then, the reference point of expert is determined and the prospect preference matrix is established. Moreover, we can obtain the overall prospect consensus degree for a MEDM problem by calculating the similarity degree between individual and collective prospect preference matrix. Furthermore, a consensus improvement method is developed to complete the consensus reaching process. Finally, we apply the proposed method to deal with a practical MEDM problem involving the construction project investment, and make some comparative analyses with existing methods. ; National Natural Science Foundation of China (NSFC) 71771155 ; China Postdoctoral Science Foundation 2020M680151 ; Sichuan Postdoctoral Science special Foundation ; Sichuan University Postdoctoral Interdisciplinary Innovation Startup Foundation ; Fundamental Research Funds for the Central Universities YJ202015 ; European Union (EU) TIN2016-75850-R ; Sichuan Province System Science and Enterprise Development Research Center Xq20B03

Political psychologists have been quick to use prospect theory in their work, realizing its potential for explaining decisions under risk. Applying prospect theory to political decision-making is not without problems, though, and here we address two of these: (1) Does prospect theory actually apply to political decision-makers, or are politicians unlike the rest of us? (2) Which dimension do politicians use as their reference point when there are multiple dimensions (e.g., votes and policy)? We address both problems in an experiment with a unique sample of Dutch members of parliament as participants. We use well-known (incentivized) decision situations and newly developed hypothetical political decision-making scenarios. Our results indicate that politicians' deviate from expected utility theory in the direction predicted by prospect theory but that these deviations are somewhat smaller than those of other people. Votes appear to be a more important determinant of politicians' reference point than is policy.