Abstract
We show that prospect theory is a valuable paradigm for wealth management. It describes well how investors perceive risk and with appropriate modeling it can be made consistent with rational decision making. Moreover, it can be represented in a simple reward-risk diagram so that the main ideas are easily communicated to clients. Finally, we show on data from a large set of private clients that there are considerable monetary gains from introducing prospect theory instead of mean-variance analysis into the client advisory process.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callMore From: Investment management & financial innovations
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
