Discussion Papers, Department of Business and Management Science, Norwegian School of Economics (NHH)
Enrico De Giorgi
Prospect Theory and the Size and Value Premium Puzzles
(), Thorsten Hens
() and Thierry Post
Abstract: Using canonical data for the US stock and bond markets, we
show that the kinked piecewise exponential 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.
Keywords: Prospect Theory; Premium Puzzles; (follow links to similar papers)
JEL-Codes: G00; (follow links to similar papers)
9 pages, December 22, 2005
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