A Further Examination of Cumulative Prospect Theory Parameterizations.

B-Tier
Journal: Journal of Risk and Uncertainty
Year: 2002
Volume: 24
Issue: 1
Pages: 31-46

Score contribution per author:

1.005 = (α=2.01 / 2 authors) × 1.0x B-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

Recent experimental studies have focused on fitting parameterized functional forms to cumulative prospect theory's weighting function. This paper examines the behavioral implications of the functional forms and the estimated parameters. We find that none of the parameterizations can simultaneously account for gambling on unlikely gains and the Allais paradox behavior or other strong choice patterns from experiments. Parameter estimates that lead to reasonable amounts of insurance and gambling behavior tend to also generate large risk premia. Taken as a whole, the analysis suggests that the functional forms proposed in the literature are not suitable for generalization to applied settings. Copyright 2002 by Kluwer Academic Publishers

Technical Details

RePEc Handle
repec:kap:jrisku:v:24:y:2002:i:1:p:31-46
Journal Field
Theory
Author Count
2
Added to Database
2026-01-26