Standard models of moral hazard predict a negative relationship between risk and incentives; however empirical studies on mutual funds present mixed results. In this paper, we propose a behavioral principal-agent model in the context of professional managers, focusing on active and passive...

The objective of this paper is twofold. The first is to incorporate mental accounting, loss-aversion, asymmetric risk-taking behavior, and probability weighting in a multi-period portfolio optimization for individual investors. While these behavioral biases have previously been identified in the...

Recent literature has found two behavioral effects - house-money and myopic loss aversion (MLA) - in several experimental designs. We show that although we can find a house-money effect using survey methods this evidence disappears when we study investment decision within a multi-period...

Most real world market participants are professional portfolio managers (PPM), which means that they are not managing their own money, but rather managing money for other people (e.g. mutual funds, pension funds). This situation generates an agency feature which has relevant consequences, as...

The objective of this paper is twofold. The first is to incorporate mental accounting, loss aversion, asymmetric risk-taking behavior, and probability weighting in a multi-period portfolio optimization for individual investors. While these behavioral biases have previously been identified in the...

Recent literature has advocated that risk-taking behavior is influenced by prior monetary gains and losses. On one hand, after perceiving monetary gains, people are willing to take more risk (house-money effect). Another stream of the literature, based on prospect theory and loss aversion,...

Standard models of moral hazard predict a negative relationship between risk and incentives; however empirical studies on mutual funds present mixed results. In this paper, we propose a behavioral principal-agent model in the context of professional managers, focusing on active and passive...