Financial Market Equilibria With Cumulative Prospect Therory

The paper shows that ﬁnancial market equilibria need not exist if agents possess cumulative prospect theory preferences with piecewise-power value functions. The reason is an inﬁniteshort-selling problem. But even when a short-sell constraint is added, non-existence can occur due to discontinuities in agents demand functions. Existence of equilibria is established whenshort-sales constraints are imposed and there is also a continuum of agents in the market.

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Year of publication:	2007-08-01
Authors:	De Giorgi, Enrico ; Hens, Thorsten ; Rieger, Marc Oliver
Institutions:	Institut für Schweizerisches Bankwesen <Zürich>
Subject:	Kapitalmarkt \| Portfolio Selection \| Erwartungstheorie \| Gleichgewichtsmodell

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Extent:	1024000 bytes 32 p. application/pdf
Series:	Universität Zürich - Institut für schweizerisches Bankwesen Working paper ; 431 (2007)
Type of publication:	Book / Working Paper
Language:	English
Classification:	D81 - Criteria for Decision-Making under Risk and Uncertainty ; G11 - Portfolio Choice ; Corporate finance and investment policy. General ; Management of financial services: stock exchange and bank management science (including saving banks) ; Individual Working Papers, Preprints ; No country specification
Source:	USB Cologne (business full texts)

Persistent link: https://www.econbiz.de/10005857777