 Investment horizon and the attractiveness of investment strategies: A behavioral approachMaik Dierkes, Carsten Erner and Stefan Zeisberger Journal of Banking & Finance, 2010, vol. 34, issue 5, 1032-1046 Abstract: We analyze the attractiveness of investment strategies over a variety of investment horizons from the viewpoint of an investor with preferences described by Cumulative Prospect Theory (CPT), currently the most prominent descriptive theory for decision making under uncertainty. A bootstrap technique is applied using historical return data of 1926-2008. To allow for variety in investors' preferences, we conduct several sensitivity analyses and further provide robustness checks for the results. In addition, we analyze the attractiveness of the investment strategies based on a set of experimentally elicited preference parameters. Our study reveals that strategy attractiveness substantially depends on the investment horizon. While for almost every preference parameter combination a bond strategy is preferred for the short run, stocks show an outperformance for longer horizons. Portfolio insurance turns out to be attractive for almost every investment horizon. Interestingly, we find probability weighting to be a driving factor for insurance strategies' attractiveness. Keywords: Behavioral; finance; Cumulative; Prospect; Theory; Portfolio; choice; Investment; strategy; Investment; horizon (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:34:y:2010:i:5:p:1032-1046 Access Statistics for this article Journal of Banking & Finance is currently edited by Ike Mathur More articles in Journal of Banking & Finance from Elsevier |
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