Comments on: Prospect theory investors http://www.vetta.org/2009/06/prospect_theory_investors/ Wed, 01 Feb 2012 19:02:52 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Cécile Lanza http://www.vetta.org/2009/06/prospect_theory_investors/comment-page-1/#comment-20178 Cécile Lanza Tue, 24 Nov 2009 03:16:56 +0000 http://www.vetta.org/?p=410#comment-20178 Interesting article. Thanks for posting. Interesting article. Thanks for posting.

]]> By: Shane Legg http://www.vetta.org/2009/06/prospect_theory_investors/comment-page-1/#comment-19855 Shane Legg Mon, 22 Jun 2009 10:30:58 +0000 http://www.vetta.org/?p=410#comment-19855 Thanks. The paper is mostly focused on the portfolio choice implications rather than the asset pricing implications. For the latter we see that it's pretty easy to get a reasonable risk free and equity premium (around 2% and 5% respectively) with standard parameters for everything in the model and the narrow framing parameter set to about 0.035 (see table 6, bottom of last two panels, rightmost two columns). The narrow framing parameter controls how much the narrow framing utility contributes to the total utility. Nobody knows what this parameter is empirically so it's hard to say whether this is a reasonable value. Thanks.

The paper is mostly focused on the portfolio choice implications rather than the asset pricing implications. For the latter we see that it’s pretty easy to get a reasonable risk free and equity premium (around 2% and 5% respectively) with standard parameters for everything in the model and the narrow framing parameter set to about 0.035 (see table 6, bottom of last two panels, rightmost two columns).

The narrow framing parameter controls how much the narrow framing utility contributes to the total utility. Nobody knows what this parameter is empirically so it’s hard to say whether this is a reasonable value.

]]> By: Eliezer Yudkowsky http://www.vetta.org/2009/06/prospect_theory_investors/comment-page-1/#comment-19852 Eliezer Yudkowsky Sun, 21 Jun 2009 23:18:05 +0000 http://www.vetta.org/?p=410#comment-19852 Nice work! What does this refined model say about the equity premium? Nice work! What does this refined model say about the equity premium?

]]> By: Shane Legg http://www.vetta.org/2009/06/prospect_theory_investors/comment-page-1/#comment-19847 Shane Legg Sat, 20 Jun 2009 22:50:46 +0000 http://www.vetta.org/?p=410#comment-19847 Glad you liked it :-) Glad you liked it :-)

]]> By: Roko http://www.vetta.org/2009/06/prospect_theory_investors/comment-page-1/#comment-19846 Roko Sat, 20 Jun 2009 21:36:07 +0000 http://www.vetta.org/?p=410#comment-19846 Shane, another great article. I am now motivated to go and read up on prospect theory! Shane, another great article. I am now motivated to go and read up on prospect theory!

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