Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/68502
Authors: 
Hlouskova, Jaroslava
Tsigaris, Panagiotis
Year of Publication: 
2012
Series/Report no.: 
Economics Series, Institute for Advanced Studies 286
Abstract: 
This research note examines the conditions which will induce a prospect theory type investor, whose reference level is set by 'playing it safe', to invest in a risky asset. The conditions indicate that this type of investor requires a large equity premium to invest in risky assets. However, once she does invest because of a large risk premium, she becomes aggressive and buys/sells till an externally imposed upper/lower bound is reached.
Subjects: 
prospect theory
loss aversion
reference level
non-investment in risky assets
JEL: 
D1
D8
G1
Document Type: 
Working Paper

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