Skip to main content

Cumulative prospect theory challenges traditional expected utility theory

Buy Article:

$55.00 plus tax (Refund Policy)

The Cumulative Prospect Theory (CPT) uses piecewise value functions instead of consumer utility and provides alternative assumptions for investment behaviour approximated by power value function. In this study, our aim to find a generalized value function that will make the value function introduced by Kahneman–Tversky (1992) a special case. This functional form of the value function determine the appropriate parameter of the values function. We believe that if one can approximate the original CPT value function by other types of functions, the optimization problem and the many other implications can be compared to choose the best model depending on the focus of the problems. This, eventually, could result in improving the theory in both theoretical and empirical points of views.
No Reference information available - sign in for access.
No Citation information available - sign in for access.
No Supplementary Data.
No Data/Media
No Metrics

Keywords: D01; D03; G10; G11; utility theory; prospect theory; expected utility; portfolio optimization

Document Type: Research Article

Affiliations: 1: Department of Economics,M. Kemal University-Hatay, 2: Faculty of Economics, University of Zurich, Institute of Applied Mathematics, Middle East Technical University, Ankara 06531, Turkey

Publication date: 2011-11-01

More about this publication?
  • Access Key
  • Free content
  • Partial Free content
  • New content
  • Open access content
  • Partial Open access content
  • Subscribed content
  • Partial Subscribed content
  • Free trial content
Cookie Policy
X
Cookie Policy
Ingenta Connect website makes use of cookies so as to keep track of data that you have filled in. I am Happy with this Find out more