Stocks as Lotteries: The Implications of Probability Weighting for Security Prices

• 成果类型: Article
• 署名作者: Barberis, Nicholas; Huang, Ming
• 署名单位: Yale University; Cornell University
• 刊物名称: AMERICAN ECONOMIC REVIEW
• ISSN/ISSBN: 0002-8282
• DOI: 10.1257/aer.98.5.2066
• 发表日期: 2008
• 页码: 2066-2100
• 关键词: EQUITY PREMIUM PUZZLE; prospect-theory; skewness preference; risk-aversion; asset prices; returns; diversification; performance

摘要

We study the asset pricing implications of Tversky and Kahneman's (1992) cumulative prospect theory, with a particular focus on its probability weighting component. Our main result, derived from a novel equilibrium with nonunique global optima, is that, in contrast to the prediction of a standard expected utility model, a security's own skewness can be priced: a positively skewed security can be overpriced and can earn a negative average excess return. We argue that our analysis offers a unifying way of thinking about a number of seemingly unrelated financial phenomena.