Prospect Theory and the Size and Value Premium Puzzles

Using canonical data for the US stock and bond markets, we show that the kinked piecewise exponential value function can rationalize the cross-section of stock returns in addition to the level of the equity premium, while the kinked piecewise-power value function of Tversky and Kahneman can explain only the latter.

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Year of publication:	2005-12-22
Authors:	De Giorgi, Enrico ; Hens, Thorsten ; Post, Thierry
Institutions:	Institutt for foretaksøkonomi, Norges Handelshøyskole (NHH)
Subject:	Prospect Theory \| Premium Puzzles

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Extent:	application/pdf
Series:	Discussion Papers.
Type of publication:	Book / Working Paper
Notes:	The text is part of a series Discussion Papers Number 2005/20 9 pages
Classification:	G00 - Financial Economics. General
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005206988