TY  - UNPD
A1  - Jakusch, Sven Thorsten
A1  - Meyer, Steffen
A1  - Hackethal, Andreas
T1  - Taming models of prospect theory in the wild? Estimation of Vlcek and Hens (2011)
T2  - SAFE working paper series ; No. 146
N2  - Shortcomings revealed by experimental and theoretical researchers such as Allais (1953), Rabin (2000) and Rabin and Thaler (2001) that put the classical expected utility paradigm von Neumann and Morgenstern (1947) into question, led to the proposition of alternative and generalized utility functions, that intend to improve descriptive accuracy. The perhaps best known among those alternative preference theories, that has attracted much popularity among economists, is the so called Prospect Theory by Kahneman and Tversky (1979) and Tversky and Kahneman (1992). Its distinctive features, governed by its set of risk parameters such as risk sensitivity, loss aversion and decision weights, stimulated a series of economic and financial models that build on the previously estimated parameter values by Tversky and Kahneman (1992) to analyze and explain various empirical phenomena for which expected utility doesn't seem to offer a satisfying rationale. In this paper, after providing a brief overview of the relevant literature, we take a closer look at one of those papers, the trading model of Vlcek and Hens (2011) and analyze its implications on Prospect Theory parameters using an adopted maximum likelihood approach for a dataset of 656 individual investors from a large German discount brokerage firm. We find evidence that investors in our dataset are moderately averse to large losses and display high risk sensitivity, supporting the main assumptions of Prospect Theory.
T3  - SAFE working paper - 146 
KW  - Prospect Theory
KW  - Parameter Elicitation
KW  - Investors Heterogeneity
Y1  - 2016
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/41698
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30:3-416989
UR  - https://ssrn.com/abstract=2845338
PB  - SAFE
CY  - Frankfurt am Main
ER  -