Skewness as an explanation of gambling in cumulative prospect theory

Skewness of return has been suggested as a reason why agents might choose to gamble, ceteris paribus, in cumulative prospect theory (CPT). We investigate the relationship between moments of return in two models where agents choices over uncertain outcomes are determined as in CPT. We illustrate via examples that in CPT theory, as with expected utility theory, propositions that agents have a preference for skewness may be invalid.

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Year of publication:	2009
Authors:	Law, D. ; Peel, D. A.
Published in:	Applied Economics. - Taylor & Francis Journals, ISSN 0003-6846. - Vol. 41.2009, 6, p. 685-689
Publisher:	Taylor & Francis Journals

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Extent:	text/html
Type of publication:	Article
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005505915