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Prospect theory as an explanation of risky choice by professional investors: Some evidence

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  • Robert A. Olsen

Abstract

This paper examines the results of surveys of professional investment managers' risk perceptions and investment preferences. Managers are found to exhibit loss aversion, to be risk averse for gains and risk loving for loss; and to believe in time diversification. The results are consistent with the implications of the S‐shaped value function of Prospect Theory.

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  • Robert A. Olsen, 1997. "Prospect theory as an explanation of risky choice by professional investors: Some evidence," Review of Financial Economics, John Wiley & Sons, vol. 6(2), pages 225-232.
    • Handle: RePEc:wly:revfec:v:6:y:1997:i:2:p:225-232
    DOI: 10.1016/S1058-3300(97)90008-2
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    Cited by:

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    2. Rafał Wolski & Monika Bolek & Jerzy Gajdka & Janusz Brzeszczyński & Ali M. Kutan, 2023. "Do investment fund managers behave rationally in the light of central bank communication? Survey evidence from Poland," Qualitative Research in Financial Markets, Emerald Group Publishing Limited, vol. 15(5), pages 757-794, February.

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