Decision-making under uncertainty – A field study of cumulative prospect theory

Gurevich, Gregory; Kliger, Doron; Levy, Ori

doi:10.1016/j.jbankfin.2008.12.017

Cited by 82 publications

(45 citation statements)

References 27 publications

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“…Prospect theory has been widely used as behavioral model of decision-making under risk, mainly in economics and finance [6,11,12]. In current MCDM studies, attitudes towards risk are seldom taken into consideration.…”

Section: Valuementioning

confidence: 99%

A Multiple Criteria Decision Making Method Based on Relative Value Distances

Shyur

Liang

Shih

et al. 2015

Foundations of Computing and Decision Sciences

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Abstract. This paper proposes a new multiple criteria decision-making method called ERVD (election based on relative value distances). The s-shape value function is adopted to replace the expected utility function to describe the risk-averse and risk-seeking behavior of decision makers. Comparisons and experiments contrasting with the TOPSIS (Technique for Order Preference by Similarity to the Ideal Solution) method are carried out to verify the feasibility of using the proposed method to represent the decision makers' preference in the decision making process. Our experimental results show that the proposed approach is an appropriate and effective MCDM method.

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Section: Valuementioning

confidence: 99%

A Multiple Criteria Decision Making Method Based on Relative Value Distances

Shyur

Liang

Shih

et al. 2015

Foundations of Computing and Decision Sciences

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“…Tversky and Kahneman (1992) observe the loss aversion coefficient of 2.25 in their experiment, are assumed to be positive constants and less than one (Kalra and Shi 2010). In Tversky and Kahneman (1992) study, without proof, the degrees of risk aversion v 1 and v 2 are yielded the value of 0.88 and are assumed "reflection," that is v 1 = v 2 (Gurevich, Kliger and Levy 2009;Dimmock and Kouwenberg 2010;Kalra and Shi 2010). Assuming λ to be equal to 2.25 and both v 1 and v 2 to be equal to 0.2.…”

Section: Cumulative Prospect Theorymentioning

confidence: 99%

“…Based on utility theory, accumulated studies on behavioral finance (Abdellaouri, Bleichrodt and Paraschiv 2007;Gurevich, Kliger and Levy 2009;Hwang and Satchell 2010) generally support that cumulative prospect theory (hereinafter CPT) developed by Kahneman and Tversky (1979) and Tversky and Kahneman (1992), is the most descriptive model of decision making under uncertainty. These studies indicate that investors with preferences according to the value (utility) function of CPT (CPT investors) care about changes in wealth (monetary return) rather than wealth levels and are assumed that the marginal sensitivity to changes in wealth diminishes when further away from a flexible reference point, such as current wealth Booij, van Praag and van de Kuilen 2010).…”

Section: Introductionmentioning

confidence: 99%

Risk Tolerance, Marketing Information and Investment Decision Makings Under Loss Aversion: Theory and Evidence

Peng

2011

SSRN Journal

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investors have propensity to discipline their depreciated assets and to sell their appreciated assets. Further, I find that CPT investors have less incentive to sell their holdings with higher advertising than ones with lower advertising when facing a paper gain or a paper loss. The empirical evidence indicates that advertising can help funds stem cash outflows, and finds investors are less willing to sell high performing investments with high fund family advertising than investments with low fund family advertising, and are more reluctant to redeem losing mutual funds with high fund family advertising than funds with low fund family advertising. For loser funds, a possible explanation from this study is that advertising seems to re-enforce the efficacy of recent investor decisions and adjust their beliefs to confirm past decisions, thus lets investors have more incentive to continue holding losing funds.For winner funds, this study infers that advertising may signal product quality, increase consumer satisfaction, brand equity and consumer loyalty that lead investors satisfied with their past decisions to have a greater propensity to retain their winning investments.

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“…The core of prospect theory is the value function, which shows the risk aversion for gains, and reflects the risk propensity for losses [30]. Prospect theory has been successfully applied the behavioral decision-making model [30][31][32][33][34][35]. For the moment, there are few researches about the application of prospect theory to Atanassov's interval-valued intuitionistic fuzzy multi-attribute decision making problems.…”

Section: Introductionmentioning

confidence: 99%

An approach to Atanassov's interval-valued intuitionistic fuzzy multi-attribute decision making based on prospect theory

Meng¹,

Tan²,

Chen³

2015

IJCIS

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Prospect theory is a very effective method to express behavioral decision making under uncertainty. This paper attempts to develop a method to multi-attribute decision making with Atanassov's interval-valued intuitionistic fuzzy information using prospect theory. This method first transforms Atanassov's interval-valued intuitionistic fuzzy variables into the prospect values using the value function in prospect theory. Based on the aspiration levels, Atanassov's intuitionistic fuzzy prospect gain and loss matrices are obtained. Then, using the Atanassov's interval-valued intuitionistic hybrid weight averaging (IVIHWA) operator or the Atanassov's interval-valued intuitionistic hybrid Shapley weight averaging (IVIHSWA) operator, the comprehensive Atanassov's interval-valued intuitionistic fuzzy prospect value of each alternative is calculated. According to the comprehensive Atanassov's interval-valued intuitionistic fuzzy prospect values, a ranking method of alternatives is presented. Finally, two illustrative examples are selected to show the feasibility and availability of the proposed method.

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Decision-making under uncertainty – A field study of cumulative prospect theory

Cited by 82 publications

References 27 publications

A Multiple Criteria Decision Making Method Based on Relative Value Distances

A Multiple Criteria Decision Making Method Based on Relative Value Distances

Risk Tolerance, Marketing Information and Investment Decision Makings Under Loss Aversion: Theory and Evidence

An approach to Atanassov's interval-valued intuitionistic fuzzy multi-attribute decision making based on prospect theory

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