Title

Prospect theory and the financial markets: A review

College

School of Economics

Department/Unit

Economics

Document Type

Article

Source Title

DLSU Business and Economics Review

Volume

20

Issue

1

First Page

99

Last Page

106

Publication Date

1-1-2010

Abstract

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.

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Digitial Object Identifier (DOI)

10.3860/ber.v20i1.1670

Disciplines

Finance and Financial Management

Keywords

Investments

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