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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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    1. Shlomo Benartzi & Richard H. Thaler, 1995. "Myopic Loss Aversion and the Equity Premium Puzzle," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(1), pages 73-92.
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    4. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
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    Cited by:

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