Prospect theory and the financial markets: A review
School of Economics
DLSU Business and Economics Review
The Prospect Theory as proposed by Kahneman and Tversky (1979) has emerged as a widely accepted theory of decision-making, thanks largely to the persistence of observed anomalies in the trading of financial products - specifically, the existence of an unusually large premium on equities, and the tendency to hold on to losing investments (disposition effect). Questions about the true nature and extent of reference-dependent loss aversion as manifested by these phenomena, however, remain. In particular, for countries like the Philippines with relatively shallow capital markets, there is a need to reconcile financial education and advice with the reality of systematically irrational investor sentiment to facilitate greater financial market participation. © 2010 De La Salle University, Manila, Philippines.
Digitial Object Identifier (DOI)
Mutuc, P. M. (2010). Prospect theory and the financial markets: A review. DLSU Business and Economics Review, 20 (1), 99-106. https://doi.org/10.3860/ber.v20i1.1670
Finance and Financial Management