IDEAS home Printed from https://ideas.repec.org/a/taf/jecmet/v26y2019i1p13-31.html
   My bibliography  Save this article

Prospect theory in the wild: how good is the nonexperimental evidence for prospect theory?

Author

Listed:
  • Andre Hofmeyr
  • Harold Kincaid

Abstract

Prospect theory is widely thought to be one of the best-confirmed accounts of human decision-making under risk. There are numerous claims in the literature that various kinds of nonexperimental, observational evidence provide strong support for prospect theory. We investigate the veracity of these claims using a set of philosophy of science morals and a careful delineation of models of choice under risk, focussing on the extant versions of prospect theory and their various components. We challenge the claim that prospect theory is well supported because it explains the equity premium puzzle. In addition, we analyse a major international survey thought to support prospect theory and argue that the support is questionable, both for statistical reasons and because the evidence itself is mixed. Our analyses highlight some important ideas in the philosophy of science and caution against strong claims about support for prospect theory that rely on nonexperimental, observational evidence.

Suggested Citation

  • Andre Hofmeyr & Harold Kincaid, 2019. "Prospect theory in the wild: how good is the nonexperimental evidence for prospect theory?," Journal of Economic Methodology, Taylor & Francis Journals, vol. 26(1), pages 13-31, January.
  • Handle: RePEc:taf:jecmet:v:26:y:2019:i:1:p:13-31
    DOI: 10.1080/1350178X.2018.1561072
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/1350178X.2018.1561072
    Download Restriction: Access to full text is restricted to subscribers.

    File URL: https://libkey.io/10.1080/1350178X.2018.1561072?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:jecmet:v:26:y:2019:i:1:p:13-31. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RJEC20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.