Discrete-time behavioral portfolio selection under cumulative prospect theory

doi:10.1016/j.jedc.2015.10.002

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	Discrete-time behavioral portfolio selection under cumulative prospect theory
	Shi, Yun 1; Cui, Xiangyu 2; Li, Duan 3
刊名	JOURNAL OF ECONOMIC DYNAMICS & CONTROL
	2015-12
卷号	61 页码:283-302
关键词	Multi-period portfolio selection S-shaped utility Probability weighting Time consistent policy Two-fund separation Non-participation puzzle and horizon effect
ISSN号	0165-1889
DOI	10.1016/j.jedc.2015.10.002
英文摘要	We formulate and study three multi-period behavioral portfolio selection models under cumulative prospect theory: (i) S-shaped utility maximization without probability weighting in a market with one risky asset; (ii) S-shaped utility maximization without probability weighting in a market with multiple risky assets which follow a joint elliptical distribution; and (iii) S-shaped utility maximization with inverse-S-shaped probability weighting in a market with one risky asset. For the first two time consistent models, we identify the well-posedness conditions and derive the semi-analytical optimal policies. For the third time inconsistent model, we assume that the investor is aware of the time inconsistency but is unable to commit to his initial plan of action. Then, we reformulate the model into an intrapersonal game model and derive the semi-analytical subgame perfect Nash equilibrium (time consistent) policy under well-posedness condition. All the three policies take a piece-wise linear feedback form. Our analysis of the three models not only partially explains the well documented phenomena of non-participation puzzle and horizon effect, but also extends the two fund separation theorem into multi-period S-shaped utility setting and pushes forward the study on time inconsistency issue incurred by probability weighting. (C) 2015 Elsevier B.V. All rights reserved.
WOS研究方向	Business & Economics
语种	英语
出版者	ELSEVIER SCIENCE BV
WOS记录号	WOS:000366232900015
内容类型	期刊论文
源URL	[http://10.2.47.112/handle/2XS4QKH4/1420]
专题	上海财经大学
通讯作者	Li, Duan
作者单位	1.Shanghai Univ, Sch Management, Shanghai 200041, Peoples R China; 2.Shanghai Univ Finance & Econ, Sch Stat & Management, Shanghai Key Lab Financial Informat Technol, Shanghai, Peoples R China; 3.Chinese Univ Hong Kong, Dept Syst Engn & Engn Management, Hong Kong, Hong Kong, Peoples R China
推荐引用方式 GB/T 7714	Shi, Yun,Cui, Xiangyu,Li, Duan. Discrete-time behavioral portfolio selection under cumulative prospect theory[J]. JOURNAL OF ECONOMIC DYNAMICS & CONTROL,2015,61:283-302.
APA	Shi, Yun,Cui, Xiangyu,&Li, Duan.(2015).Discrete-time behavioral portfolio selection under cumulative prospect theory.JOURNAL OF ECONOMIC DYNAMICS & CONTROL,61,283-302.
MLA	Shi, Yun,et al."Discrete-time behavioral portfolio selection under cumulative prospect theory".JOURNAL OF ECONOMIC DYNAMICS & CONTROL 61(2015):283-302.