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Portfolio choice in personal equilibrium

Author

Listed:
  • Ai, Jing
  • Zhao, Lin
  • Zhu, Wei

Abstract

This paper finds that in portfolio choice where reference point arises endogenously in personal equilibria, investors behave as if they had a concave probability weighting function. This finding establishes a link between the reference-dependent utility and the rank-dependent utility theories.

Suggested Citation

  • Ai, Jing & Zhao, Lin & Zhu, Wei, 2018. "Portfolio choice in personal equilibrium," Economics Letters, Elsevier, vol. 170(C), pages 163-167.
    • Handle: RePEc:eee:ecolet:v:170:y:2018:i:c:p:163-167
    DOI: 10.1016/j.econlet.2018.06.018
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    References listed on IDEAS

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    Cited by:

    1. Daijiro Kawanaka, 2023. "Mixture Attitudes of Expectation-Based Loss Aversion," Discussion Papers in Economics and Business 23-02, Osaka University, Graduate School of Economics.

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    More about this item

    Keywords

    Loss aversion; Personal equilibrium; Portfolio choice; Rank-dependent utility;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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