Can Investor risk perception be explained by cumulative prospect theory
| dc.contributor.advisor | Zeisberger, Stefan | |
| dc.contributor.author | Strucks, Markus | |
| dc.date.issued | 2017-08-28 | |
| dc.description.abstract | Behavioral insights from (Cumulative) Prospect Theory (CPT) as an innovative theory of decision-making revolutionized financial risk research. Despite its theoretical appeal, the empirical relevance of CPT with regard to perceived risk remains yet unclear, partially because it requires complex implementation. While arguing that the theory fits an accurate description of investor risk perception, we empirically test this claim in an experimental investment setting, which overcomes the inherent implementation complexities of CPT by achieving gain-loss separability and subject reference point homogeneity. OLS and ordered logistic regression results as well as subsequent robustness checks show that the CPT value of an investment can significantly predict investment behavior and individual risk perception. Comparing these results with those of including standard deviation and lower partial moments measures, we discover that only the total probability of loss is comparably significant. Albeit these findings are in favor of recent behavioral insights in the academic field of finance, an additional analysis shows that revised parameters of the CPT function – in contrast to standard ones – can yield a substantially improved representation of decision-making under risky choice. Keywords: | en_US |
| dc.identifier.uri | http://theses.ubn.ru.nl/handle/123456789/4912 | |
| dc.language.iso | en | en_US |
| dc.thesis.faculty | Faculteit der Managementwetenschappen | en_US |
| dc.thesis.specialisation | Financial Economics | en_US |
| dc.thesis.studyprogramme | Master Economics | en_US |
| dc.thesis.type | Master | en_US |
| dc.title | Can Investor risk perception be explained by cumulative prospect theory | en_US |
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