Prospect Theory, Indifference Curves, and Hedging Risks

Бролл, Удо; Egozcue, Martín; Wong, Wing‐Keung; Zitikis, Ričardas

doi:10.1093/amrx/abq013

Cited by 51 publications

(34 citation statements)

References 18 publications

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“…However, there are many other types of investors with different kinds of behaviors, for example, risk averters (Markowitz, 1952), risk 20 seekers (Wong and Li, 1999;Wong, 2007;Guo and Wong, 2016), and investors with S-shaped and reversed S-shaped utility functions Levy, 2002, 2004;Wong and Chan, 2008;Broll, et al, 2010;Egozcue, et al, 2011;Bai, et al, 2011). Extension to the study on other behavioral biases should, therefore, be made in the future.…”

Section: Empirical Findingsmentioning

confidence: 99%

Empirical study on conservative and representative heuristics of Hong Kong small investors adopting momentum and contrarian trading strategies

Chow

Hon

Wong

et al. 2018

IJRM

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Abstract:Recently, a new Bayesian approach has been developed to explain some market anomalies. In this paper, we conduct a questionnaire survey to examine whether the theory holds empirically by studying the conservative and representative heuristics by Hong Kong small investors who adopt momentum and/or contrarian trading strategies. In addition, our study provides evidence for the small investors on their time horizon and risk tolerance when facing uncertainty in their investments.Our findings are useful to small investors in their investment decision making and useful to financial advisors in providing service to small investors.

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Section: Empirical Findingsmentioning

confidence: 99%

Empirical study on conservative and representative heuristics of Hong Kong small investors adopting momentum and contrarian trading strategies

Chow

Hon

Wong

et al. 2018

IJRM

View full text Add to dashboard Cite

show abstract

“…Markowitz (1952), Levy andLevy (2002, 2004), Wong and Chan (2008), among others, suggest investors could follow S-shaped as well as reverse S-shaped utility functions. Broll, Egozcue, Wong, Zitikis (2010), and Egozcue, Fuentes García, Wong, and Zitikis (2011) argue that investment behavior for investors could follow S-shaped as well as reverse S-shaped utility functions. Recently, Guo, Qiao, and Wong (2017) introduce a new utility function for investors that consists of both risk-averse and risk-seeking components to provide a new solution to answer the observation posed by Friedman and Savage (1948) that investors buy insurance and also try their luck with lotteries.…”

Section: Utility Functionsmentioning

confidence: 99%

Decision Sciences, Economics, Finance, Business, Computing, and Big Data: Connections

2018

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This paper provides a review of some connecting literature in Decision Sciences, Economics, Finance, Business, Computing, and Big Data. We then discuss some research that is related to the six cognate disciplines. Academics could develop theoretical models and subsequent econometric and statistical models to estimate the parameters in the associated models. Moreover, they could then conduct simulations to examine whether the estimators or statistics in the new theories on estimation and hypothesis have small size and high power. Thereafter, academics and practitioners could then apply their theories to analyze interesting problems and issues in the six disciplines and other cognate areas. KeywordsDecision sciences, economics, finance, business, computing, and big data, theoretical models, econometric and statistical models, applications. JEL Classification AbstractThis paper provides a review of some connecting literature in Decision Sciences, Economics, Finance, Business, Computing, and Big Data. We then discuss some research that is related to the six cognate disciplines. Academics could develop theoretical models and subsequent econometric and statistical models to estimate the parameters in the associated models. Moreover, they could then conduct simulations to examine whether the estimators or statistics in the new theories on estimation and hypothesis have small size and high power. Thereafter, academics and practitioners could then apply their theories to analyze interesting problems and issues in the six disciplines and other cognate areas.

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“…Recent advances in decision theory under risk focus on S-shaped or reverse S-shaped utility functions (Levy and Levy, 2004;Wong and Chan, 2008). Broll et al (2010) or Egozcue et al (2011) studied the properties of (µ, σ)-indifference curves with reverse S-shaped utility functions.…”

Section: Parallelsmentioning

confidence: 99%