Abstract
The Prospect theory developed by Daniel Kahneman and Amos Tversky represents an alternative theory of decision making under risk opposing the standard Morgenstern–von Neumann Expected utility theory. Normative theory proposes the guideline of “should behave” which is ever questionable as “observed behaviours” do not conform to the same in many cases. Unlike a normative theory, such as Expected utility theory, Prospect theory is a positive theory which is based on “observed behaviours” or “actually behave”. Kahneman and Tversky made various experimental observations which were based on different questions. This paper attempts to revisit the Prospect Theory by using the same questions in the context of Indian evidences. This empirical study helps learning the Prospect theory with “hands on” experimentation. It ends with an optimistic note that these Indian evidences may add some value to the body of knowledge of empirical research in the field of Behavioural Finance.
Published Version
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