Shifts of Reference Points for Framing of Strategic Decisions and Changing Risk-Return Associations
Previous results on nonlinear risk-return associations, predicted by prospect theory, are replicated with mean quadratic differences instead of variance as a measure of risk. In contrast to assumptions of these studies, results with a sample from the COMPUSTAT-database provide evidence that at least a minority of firms shift to individual reference levels, which are represented here through levels of minimal risk. Further, changes of environmental conditions as an alternative explanation for switching risk-return relationships are tested against prospect theory predictions. It is shown that risk-return relationships remain stable as long as the relative position to the individual reference level is stable. This explains switching risk-return relationships better than changing environmental conditions.
Volume (Year): 46 (2000)
Issue (Month): 1 (January)
|Contact details of provider:|| Postal: |
Web page: http://www.informs.org/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:inm:ormnsc:v:46:y:2000:i:1:p:63-76. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mirko Janc)
If references are entirely missing, you can add them using this form.