What Does it Take for a Specific Prospect Theory Type Household to Engage in Risky Investment?

Hlouskova, Jaroslava and Tsigaris, Panagiotis (April 2012) What Does it Take for a Specific Prospect Theory Type Household to Engage in Risky Investment? IHS Economics Series 286

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Abstract or Table of Contents

Abstract: This research note examines the conditions which will induce a prospect theory type investor, whose reference level is set by 'playing it safe', to invest in a risky asset. The conditions indicate that this type of investor requires a large equity premium to invest in risky assets. However, once she does invest because of a large risk premium, she becomes aggressive and buys/sells till an externally imposed upper/lower bound is reached.;

Item Type: IHS Series
Keywords: 'Prospect theory' 'Loss aversion' 'Reference level' 'Non-investment in risky assets'
Classification Codes (e.g. JEL): D1, D8, G1
Status: Published
Date Deposited: 26 Sep 2014 10:39
Last Modified: 23 Jul 2017 05:24
URI: http://irihs.ihs.ac.at/id/eprint/2131

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