Title: Prospect theory and its Explanation for Equity Premium From a Behavioral Finance Perspective
Abstract: Integrating psychological research achievements with economics, prospect theory modified the undamental hypothesis of rational and selfish agent in traditional economics. It gives a better explanation for decision behaviors under uncertainty and provides the basis for behavioral finance. Being widely applied overseas, it also explains many financial market anomalies better than the traditional ones did. So first, this paper gives a brief introduction to prospect theory,and then illuminates its progress in interpretingepuity premium, which is one of the most important financial market anomalies. Then, the implication of behavioral finance for finance theory development is discussed.
Publication Year: 2005
Publication Date: 2005-01-01
Language: en
Type: article
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