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dc.contributor.authorRengifo, Erick W.en_US
dc.contributor.authorTrifan, Emanuelaen_US
dc.date.accessioned2007-07-04en_US
dc.date.accessioned2010-05-14T11:57:02Z-
dc.date.available2010-05-14T11:57:02Z-
dc.date.issued2006en_US
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_US
dc.language.isoengen_US
dc.publisherTechn. Univ., Inst. für Volkswirtschaftslehre Darmstadten_US
dc.relation.ispartofseriesDarmstadt discussion papers in economics 180en_US
dc.subject.jelC32en_US
dc.subject.jelC35en_US
dc.subject.jelG10en_US
dc.subject.ddc330en_US
dc.subject.keywordprospect theoryen_US
dc.subject.keywordloss aversionen_US
dc.subject.keywordcapital allocationen_US
dc.subject.keywordValue-at-Risken_US
dc.subject.keywordportfolio evaluationen_US
dc.titleInvestors Facing Risk: Loss Aversion and Wealth Allocation Between Risky and Risk-Free Assetsen_US
dc.typeWorking Paperen_US
dc.identifier.ppn534881440en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungen-
Appears in Collections:Darmstadt Discussion Papers in Economics, Inst. f. VWL, TU Darmstadt

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