Attitudes Toward Risk and the Risk-Return Paradox: Prospect Theory Explanations.

Fiegenbaum, Avi; Thomas, Howard

doi:10.2307/256499

Cited by 547 publications

(218 citation statements)

References 26 publications

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“…The statistical tests are based on Kendall's (1938)  correlation coefficient. The obtained results also support Fiegenbaum and Thomas's (1988) findings. Alam and Boon Tang (2012) showed that Islamic banks located above target risk level tend to show risk-averse behaviour, while banks below target risk level inclined towards risk-seeking attitude.…”

Section: Literature Reviewsupporting

confidence: 86%

“…Then, Spearman rank correlations between risk and return and the negative association ratio are calculated for each group. The results corroborate with those of Fiegenbaum and Thomas's (1988). Miller and Leiblein (1996) favoured five-year average ROA as it does not vary with changes in financial leverage, as does ROE.…”

Section: Literature Reviewsupporting

confidence: 82%

“…laws and regulations, legal compliances, and cultures). Fiegenbaum and Thomas (1988), in one of the earliest studies take a look at this Theory at the organizational level and explore the relationships between an organization's risks and return levels. They investigate the risk and return parameters of many industries using rate of Return on Equity (ROE) and variance of ROE as return and risk measures.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Their results strongly support the above presented Prospect Theory's implications. Jegers (1991) follows Fiegenbaum and Thomas's (1988) methodology to test some new return and risk variables like ROA (Return on Assets) in addition to ROE (which only reflects shareholders' viewpoint), which would also take into account the managerial performance view, and Cash Flow on Equity (CFE), and a Coefficient of Variation (CV) (defined as the standard deviation of returns divided by the average return), in addition to the variance of returns. Jegers (1991) calculates each firm's time average return, ranks firms according to these values and divides the firms into two equally sized groups -those with above and below target returns (the target is the median return).…”

Section: Literature Reviewmentioning

confidence: 99%

“…Finally, Johnson's (1994) analysis of risk-attitude in banks in a behavioral finance framework is also based on Fiegenbaum and Thomas (1988) and he uses Fishburn's (1977) measure of risk defined as dispersion about the mean outcome. Johnson (1994) tests several measures of return and risk for a sample of US commercial banks for the 1970-1989 periods.…”

Section: Literature Reviewmentioning

confidence: 99%

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Behavioral Implications of Risk-Return Associations: An Application of Prospect Theory on CNX NIFTY Companies

Dasgupta¹

2017

AABFJ

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This study primarily investigates the risk attitudes of the fifty CNX NIFTY companies from a behavioral perspective as proposed by Kahneman and Tversky (1979) and Tversky and Kahneman (1992). It hypothesizes that for below target returns, a large majority of Indian companies would be risk-seeking, and for above target returns, most of them would be risk-averse. To fulfil its objectives, this study uses rates of return on assets and equity and the capital ratios of fifty CNX NIFTY companies over the period [2009][2010][2011][2012][2013]. It also uses Kendall's (1938) AbstractThis study primarily investigates the risk attitudes of the fifty CNX NIFTY companies from a behavioral perspective as proposed by Kahneman and Tversky (1979) and Tversky and Kahneman (1992). It hypothesizes that for below target returns, a large majority of Indian companies would be risk-seeking, and for above target returns, most of them would be riskaverse. To fulfil its objectives, this study uses rates of return on assets and equity and the capital ratios of fifty CNX NIFTY companies over the period -2013. It also uses Kendall's (1938 test to measure the correlations between above variables within the relevant groups (all companies and each sub group [under Size and Industry]). Results show that bigger and smaller Indian companies and their managers are mostly risk-seeking and risk-averse respectively and shareholders-centric in regard to their attitude. These results will have important implications for the Indian companies and managers in evaluating their risk attitudes from the behavioral perspective.JEL Classification: E37, F37, G12

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Section: Literature Reviewsupporting

confidence: 86%

Section: Literature Reviewsupporting

confidence: 82%

Section: Literature Reviewmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

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Behavioral Implications of Risk-Return Associations: An Application of Prospect Theory on CNX NIFTY Companies

Dasgupta¹

2017

AABFJ

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Strategic Reference Point Theory

1996

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How can executives achieve a match between expected external environmental conditions and internal organizational capabilities that facilitates improved performance? This paper argues that a firm's choice of ‘reference points’ can help achieve strategic alignment capable of yielding improved performance and potentially even a sustainable competitive advantage. Building upon prospect theory and other relevant theoretical perspectives, the strategic reference point (SRP) matrix is developed. A firm's SRP consists of three dimensions: internal capability, external conditions, and time. A theory is developed which posits an optimal SRP structure, and propositions are offered which articulate the expected relationships between the SRP, strategic choice behavior, and firm performance. The paper closes with some suggestions for using strategic reference points in both research and practice.

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To be different, or to be the same? It’s a question (and theory) of strategic balance

1999

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Attitudes Toward Risk and the Risk-Return Paradox: Prospect Theory Explanations.

Cited by 547 publications

References 26 publications

Behavioral Implications of Risk-Return Associations: An Application of Prospect Theory on CNX NIFTY Companies

Behavioral Implications of Risk-Return Associations: An Application of Prospect Theory on CNX NIFTY Companies

Strategic Reference Point Theory

To be different, or to be the same? It’s a question (and theory) of strategic balance

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