Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/32078 
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dc.contributor.authorRengifo, Erick W.en
dc.contributor.authorTrifan, Emanuelaen
dc.date.accessioned2007-07-04-
dc.date.accessioned2010-05-14T11:57:02Z-
dc.date.available2010-05-14T11:57:02Z-
dc.date.issued2006-
dc.identifier.urihttp://hdl.handle.net/10419/32078-
dc.description.abstractThis paper studies the impact of loss aversion on decisions regarding the allocation of wealth between risky and risk-free assets. We use a Value-at-Risk portfolio model with endogenous desired risk levels that are individually determined in an extended prospect theory framework. This framework allows for the distinction between gains and losses with respect to a subjective reference point as in the original prospect theory, but also for the influence of past performance on the current perception of the risky portfolio value. We show how the portfolio evaluation frequency impacts investor decisions and attitudes when facing financial losses and analyze the role of past gains and losses in the current wealth allocation. The perceived portfolio value exhibits distinct evolutions in two frequency segments delimitated by what we consider to be the optimal evaluation horizon of one year. Our empirical results suggest that previous research relying on VaR underestimates the aversion of real individual investors to financial losses.en
dc.language.isoengen
dc.publisher|aTechnische Universität Darmstadt, Department of Law and Economics |cDarmstadten
dc.relation.ispartofseries|aDarmstadt Discussion Papers in Economics |x180en
dc.subject.jelC32en
dc.subject.jelC35en
dc.subject.jelG10en
dc.subject.ddc330en
dc.subject.keywordprospect theoryen
dc.subject.keywordloss aversionen
dc.subject.keywordcapital allocationen
dc.subject.keywordValue-at-Risken
dc.subject.keywordportfolio evaluationen
dc.titleInvestors Facing Risk: Loss Aversion and Wealth Allocation Between Risky and Risk-Free Assets-
dc.typeWorking Paperen
dc.identifier.ppn534881440en
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen
dc.identifier.repecRePEc:zbw:darddp:dar_28063en

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