Prospect theory, the disposition effect, and asset prices

• 成果类型: Article
• 署名作者: Li, Yan; Yang, Liyan
• 署名单位: Pennsylvania Commonwealth System of Higher Education (PCSHE); Temple University; University of Toronto
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2012.11.002
• 发表日期: 2013
• 页码: 715-739
• 关键词: Prospect theory; Disposition effect; momentum; reversal; turnover

摘要

We build a general equilibrium model to examine the implications of prospect theory for the disposition effect, asset prices, and trading volume. Diminishing sensitivity predicts a disposition effect, price momentum, a reduced return volatility, and a positive return-volume correlation. Loss aversion generally predicts the opposite. In calibrated economies, there is a nontrivial range of preference parameters for prospect theory to simultaneously explain the disposition effect, the momentum effect, and the equity premium puzzle. Our model is helpful for understanding a wide range of financial phenomena and it also suggests new testable predictions. (C) 2012 Elsevier B.V. All rights reserved.