Theory Matters for Financial Advice!

Thorsten Hens and János Mayer
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Thorsten Hens: University of Zurich and Swiss Finance Institute
János Mayer: University of Zurich

No 14-22, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: We show that the optimal asset allocation for an investor depends crucially on the theory with which the investor is modeled. For the same market data and the same client data different theories lead to different portfolios. The market data we consider is standard asset allocation data. The client data is determined by a standard risk profiling question and the theories we apply are mean-variance analysis, expected utility analysis and cumulative prospect theory.

Keywords: Cumulative Prospect Theory; Expected Utility Analysis; Mean Variance Analysis (search for similar items in EconPapers)
JEL-codes: C61 D81 G02 G11 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2014-03
New Economics Papers: this item is included in nep-upt
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp1422

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