PROSPECT THEORY: A PARAMETRIC ANALYSIS OF FUNCTIONAL FORMS IN BRAZIL
ABSTRACT This study aims to analyze risk preferences in Brazil based on prospect theory by estimating the risk aversion parameter of the expected utility theory (EUT) for a select sample, in addition to the value and probability function parameter, assuming various functional forms, and a newly proposed value function, the modified log. This is the first such study in Brazil, and the parameter results are slightly different from studies in other countries, indicating that subjects are more risk averse and exhibit a smaller loss aversion. Probability distortion is the only common factor. As expected, the study finds that behavioral models are superior to EUT, and models based on prospect theory, the TK and Prelec weighting function, and the value power function show superior performance to others. Finally, the modified log function proposed in the study fits the data well, and can thus be used for future studies in Brazil.
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Fundação Getulio Vargas, Escola de Administração de Empresas de S.Paulo
2017
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oai:scielo:S0034-759020170005004952017-10-30PROSPECT THEORY: A PARAMETRIC ANALYSIS OF FUNCTIONAL FORMS IN BRAZILLOBEL,ROBERT EUGENEKLOTZLE,MARCELO CABUSSILVA,PAULO VITOR JORDÃO DA GAMAPINTO,ANTONIO CARLOS FIGUEIREDO Behavioral finance prospect theory value function weighting function Brazil ABSTRACT This study aims to analyze risk preferences in Brazil based on prospect theory by estimating the risk aversion parameter of the expected utility theory (EUT) for a select sample, in addition to the value and probability function parameter, assuming various functional forms, and a newly proposed value function, the modified log. This is the first such study in Brazil, and the parameter results are slightly different from studies in other countries, indicating that subjects are more risk averse and exhibit a smaller loss aversion. Probability distortion is the only common factor. As expected, the study finds that behavioral models are superior to EUT, and models based on prospect theory, the TK and Prelec weighting function, and the value power function show superior performance to others. Finally, the modified log function proposed in the study fits the data well, and can thus be used for future studies in Brazil.info:eu-repo/semantics/openAccessFundação Getulio Vargas, Escola de Administração de Empresas de S.PauloRevista de Administração de Empresas v.57 n.5 20172017-09-01info:eu-repo/semantics/articletext/htmlhttp://old.scielo.br/scielo.php?script=sci_arttext&pid=S0034-75902017000500495en10.1590/s0034-759020170507 |
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LOBEL,ROBERT EUGENE KLOTZLE,MARCELO CABUS SILVA,PAULO VITOR JORDÃO DA GAMA PINTO,ANTONIO CARLOS FIGUEIREDO |
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LOBEL,ROBERT EUGENE KLOTZLE,MARCELO CABUS SILVA,PAULO VITOR JORDÃO DA GAMA PINTO,ANTONIO CARLOS FIGUEIREDO PROSPECT THEORY: A PARAMETRIC ANALYSIS OF FUNCTIONAL FORMS IN BRAZIL |
author_facet |
LOBEL,ROBERT EUGENE KLOTZLE,MARCELO CABUS SILVA,PAULO VITOR JORDÃO DA GAMA PINTO,ANTONIO CARLOS FIGUEIREDO |
author_sort |
LOBEL,ROBERT EUGENE |
title |
PROSPECT THEORY: A PARAMETRIC ANALYSIS OF FUNCTIONAL FORMS IN BRAZIL |
title_short |
PROSPECT THEORY: A PARAMETRIC ANALYSIS OF FUNCTIONAL FORMS IN BRAZIL |
title_full |
PROSPECT THEORY: A PARAMETRIC ANALYSIS OF FUNCTIONAL FORMS IN BRAZIL |
title_fullStr |
PROSPECT THEORY: A PARAMETRIC ANALYSIS OF FUNCTIONAL FORMS IN BRAZIL |
title_full_unstemmed |
PROSPECT THEORY: A PARAMETRIC ANALYSIS OF FUNCTIONAL FORMS IN BRAZIL |
title_sort |
prospect theory: a parametric analysis of functional forms in brazil |
description |
ABSTRACT This study aims to analyze risk preferences in Brazil based on prospect theory by estimating the risk aversion parameter of the expected utility theory (EUT) for a select sample, in addition to the value and probability function parameter, assuming various functional forms, and a newly proposed value function, the modified log. This is the first such study in Brazil, and the parameter results are slightly different from studies in other countries, indicating that subjects are more risk averse and exhibit a smaller loss aversion. Probability distortion is the only common factor. As expected, the study finds that behavioral models are superior to EUT, and models based on prospect theory, the TK and Prelec weighting function, and the value power function show superior performance to others. Finally, the modified log function proposed in the study fits the data well, and can thus be used for future studies in Brazil. |
publisher |
Fundação Getulio Vargas, Escola de Administração de Empresas de S.Paulo |
publishDate |
2017 |
url |
http://old.scielo.br/scielo.php?script=sci_arttext&pid=S0034-75902017000500495 |
work_keys_str_mv |
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