In this contribution, we address the issue of reference dependence within a behavioral portfolio model defined under Cumulative Prospect Theory. In such a framework, an investor selects the portfolio weights in order to maximize her prospect value, where portfolio returns are measured as deviations from a certain reference point. The location of this reference point affects actual investment decisions. We consider alternative hypothesis and perform an application to the European equity market.
Reference dependence in behavioral portfolio selection
Barro, Diana
;Corazza, Marco
;Nardon, Martina
2022-01-01
Abstract
In this contribution, we address the issue of reference dependence within a behavioral portfolio model defined under Cumulative Prospect Theory. In such a framework, an investor selects the portfolio weights in order to maximize her prospect value, where portfolio returns are measured as deviations from a certain reference point. The location of this reference point affects actual investment decisions. We consider alternative hypothesis and perform an application to the European equity market.File in questo prodotto:
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