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Prospect theory as an explanation of risky choice by professional investors: Some evidence
Author(s) -
Olsen Robert A.
Publication year - 1997
Publication title -
review of financial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.347
H-Index - 41
eISSN - 1873-5924
pISSN - 1058-3300
DOI - 10.1016/s1058-3300(97)90008-2
Subject(s) - diversification (marketing strategy) , prospect theory , economics , loss aversion , investment (military) , risk aversion (psychology) , value (mathematics) , perception , financial economics , function (biology) , microeconomics , actuarial science , expected utility hypothesis , business , psychology , marketing , machine learning , neuroscience , evolutionary biology , politics , political science , computer science , law , biology
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.