Reference Dependence in Behavioral Portfolio Selection

Diana Barro (), Marco Corazza () and Martina Nardon ()
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Diana Barro: Ca’ Foscari University of Venice, Department of Economics
Marco Corazza: Ca’ Foscari University of Venice, Department of Economics
Martina Nardon: Ca’ Foscari University of Venice, Department of Economics

A chapter in Mathematical and Statistical Methods for Actuarial Sciences and Finance, 2022, pp 57-63 from Springer

Abstract: Abstract In this contribution, we address the issue of reference dependence within a behavioral portfolio model defined under Cumulative Prospect Theory. In such a framework, an investor selects the portfolio weights in order to maximize her prospect value, where portfolio returns are measured as deviations from a certain reference point. The location of this reference point affects actual investment decisions. We consider alternative hypothesis and perform an application to the European equity market.

Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-030-99638-3_10

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DOI: 10.1007/978-3-030-99638-3_10

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