The 1-shot ?-beauty contest is a non-equilibrium strategic game under bounded rationality conditions, while equilibrium is approached if the game is played iteratively sufficiently many times. Experimental data of the 1-shot setting of the 0-equilibrium game show a common pattern: The spectrum...

The appendix can be found at: "http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2005194" http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2005194 We consider choice over uncertain, monetary payoffs and study a general class of preferences. These preferences favor diversification, except...

This paper shows that the framework proposed by Barberis and Huang (2009) to incorporate narrow framing and loss aversion into dynamic models of portfolio choice and asset pricing can be extended to also account for probability weighting and for a value function that is convex on losses and...

We provide theoretical and empirical arguments in favor of a concave shape for the security market line, or a diminishing marginal premium for market risk. In capital market equilibrium with binding portfolio restrictions, different investors generally hold different sets of risky securities....

This study investigates reference-dependent choice with a stochastic, state-dependent reference point. The optimal reference-dependent solution equals the optimal consumption solution (no loss aversion) if the reference point is selected fully endogenously. Given that loss aversion is...