Prospect theory and the size and value premium puzzles
Working paper
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Date
2005-11Metadata
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- Discussion papers (FOR) [566]
Abstract
Using canonical data for the US stock and bond markets, we show that the kinked piecewiseexponential value function can rationalize the cross-section of stock returns in addition to the level of the equity premium, while the kinked piecewise-power value function of Tversky and Kahneman can explain only the latter.
Publisher
Norwegian School of Economics and Business Administration. Department of Finance and Management ScienceSeries
Discussion paper2005:20