Prospect theory and the CAPM : a contradiction or coexistence?
Working paper
Permanent lenke
http://hdl.handle.net/11250/163727Utgivelsesdato
2003-10Metadata
Vis full innførselSamlinger
- Discussion papers (FOR) [566]
Sammendrag
Under the assumption of normally distributed returns, we analyze whether the Cumulative Prospect Theory of Tversky and Kahneman (1992) is consistent with the Capital Asset Pricing Model. We find that in every financial market equilibrium the Security Market Line Theorem holds. However, under the specific functional form suggested by Tversky and Kahneman (1992) financial market equilibria do not exist. We suggest an alternative functional form that is consistent with both, the experimental results of Tversky and Kahneman and also with the existence of equilibria.
Utgiver
Norwegian School of Economics and Business Administration. Department of Finance and Management ScienceSerie
Discussion paper2003:11