Many economic and financial decisions depend crucially on their timing. People decide when to invest in a project, when to liquidate assets, or when to stop gambling in a casino. We provide a general result on prospect theory decision makers who are unaware of the time-inconsistency induced by...

Prospect theory is arguably the most prominent alternative to expected utility theory. We study the investment or gambling behavior of a prospect theory decision maker who is aware of his time-inconsistency but lacks commitment. For the empirically relevant prospect theory specifications, we...

We develop a tractable equilibrium asset pricing model with Cumulative Prospect Theory (CPT) preferences. Using GMM on a sample of U.S. equity index option returns, we show that by introducing a single common probability weighting parameter for both tails of the return distribution, the CPT...