Prospect Theory and Stock Market Anomalies
Nicholas C. Barberis,
Lawrence Jin () and
No 27155, NBER Working Papers from National Bureau of Economic Research, Inc
We present a new model of asset prices in which investors evaluate risk according to prospect theory and examine its ability to explain 23 prominent stock market anomalies. The model incorporates all the elements of prospect theory, takes account of investors’ prior gains and losses, and makes quantitative predictions about an asset’s average return based on empirical estimates of its volatility, skewness, and past capital gain. We ﬁnd that the model is helpful for thinking about a majority of the 23 anomalies.
JEL-codes: G11 G12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fmk, nep-ore and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed
Published as NICHOLAS BARBERIS & LAWRENCE J. JIN & BAOLIAN WANG, 2021. "Prospect Theory and Stock Market Anomalies," The Journal of Finance, vol 76(5), pages 2639-2687.
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:27155
Ordering information: This working paper can be ordered from
Access Statistics for this paper
More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().