Prospect theory and narrow framing bias: Evidence from emerging markets

Arnaldo João do Nascimento Junior, Marcelo Klotzle, Luiz Eduardo T. Brandão and Antonio Carlos Figueiredo Pinto

The Quarterly Review of Economics and Finance, 2021, vol. 80, issue C, 90-101

Abstract: Using prospect theory, we analyzed the narrow framing bias in investment decisions in certain emerging countries: Brazil, China, Russia, Mexico and South Africa. In all cases, we empirically identified the predictive power of prospect theory for stock returns. We also found that the probability weighting function is the most important factor in this predictive power. The relationship between prospect theory and stock returns is different in each country and may be influenced by factors associated with cultural aspects.

Keywords: Prospect theory; Narrow framing bias; Probability weighting function; Emerging markets; Stock returns (search for similar items in EconPapers)
JEL-codes: G11 G12 G41 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:80:y:2021:i:c:p:90-101

DOI: 10.1016/j.qref.2021.01.016

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