How does market trend sentiment affect investors' asymmetric loss-gain tradeoffs? Several empirical tests indicate that investors are far more loss adverse during bull markets than during bear markets (see Hwang and Satchell, 2010; Hofschire et al, 2013). In this paper we provide a sound theoretical...

Thaler and Sunstein (2008) introduce two stereotypical decision makers: the Econs, imaginary people who always behave as strictly rational expected utility maximizers, and the Humans, real people subject to ordinary behavioral biases. This note sheds light on how the axiomatic target-oriented...

In their pioneering works on prospect theory Kahneman and Tversky (1979, 1992) propose the ground-breaking idea that in making decisions under risk individuals evaluate asymmetrically losses and gains against to a personal reference point. According to the Kahneman and Tversky (1979) statement...

According to the behavioral finance theory, agents act coherently with the Kahneman and Tversky prospect paradigms and may violate those dictated by the rational expected utility. From the point of view of real financial markets' applications, a key question concerns how to eliciting the...

Recent empirical studies in Behavioral Agency Model (see Pepper and Gore, 2012) on executive compensations make evidence how the agent attitude to risk influences the subjectively perceived incentive value. The paper sets out a compensation schedule matching multiple goals: (1) aligning the...

According to the target-oriented decision model (see Castagnoli and Li Calzi,1996 and Bordley and Li Calzi, 2000) the individual agent cardinal utility can be simply elicited by assessing the (random) goal the agent wishes to meet. The use of the target-oriented language to design risk...

The “hard-easy effect” is a well-known cognitive bias on self-confidence calibration that refers to a tendency to overestimate the probability of success in hard-perceived tasks, and to underestimate it in easy-perceived tasks. This paper provides a target-based foundation for this effect,...