Prospect theory for stock markets: Empirical evidence with time-series data

Wenlang Zhang and Willi Semmler

Journal of Economic Behavior & Organization, 2009, vol. 72, issue 3, 835-849

Abstract: Based on the loss aversion model of asset pricing, this paper explores empirical evidence on the prospect theory for stock markets with time-series data. The analysis, using a state-space model, shows that previous gains and losses may have asymmetric effects on investment behavior, pointing to the possibility of break-even effects ignored by asset-pricing models using prospect theory.

Keywords: Prospect; theory; Loss; aversion; State-space; model; House-money; effect; Break-even; effect (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (30)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:72:y:2009:i:3:p:835-849

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