Applying Regret Theory to Investment Choices: Currency Hedging Decisions

Bruno Solnik and Sébastien Michenaud
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Bruno Solnik: GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique
Sébastien Michenaud: Jones Graduate School of Management - Rice University [Houston]

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Abstract: The authors develop a model that has two components of risk: traditional risk (volatility) and regret risk. They apply the model to currency hedging to demonstrate behavior that would be counterintuitive when considering only traditional risk. The model is limited to relatively simple decision constructs because of the intricacy of applying regret theory and is distinctly different from other loss aversion behavioral models.

Keywords: Regret Theory; Investment choices; Currency Hedging Decisions (search for similar items in EconPapers)
Date: 2009-02
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Citations: View citations in EconPapers (1)

Published in CFA Digest, 2009, Vol.39,nº1, pp.55-56. ⟨10.2469/dig.v39.n1.23⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00491683

DOI: 10.2469/dig.v39.n1.23

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