What is the “value” of value-at-risk in a simulated portfolio decision-making game?
In the paper, I simulate the social network games of a portfolio selection where agents consider VaR when managing their portfolios. Such agents behave quite differently from the agents considering only the expected returns of the alternatives that are available to them in time. The level of omniscience of agents and the presence of liquidity agents are demonstrated to be significant factors for the portfolio management.
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- Kahneman, Daniel & Tversky, Amos, 1979.
"Prospect Theory: An Analysis of Decision under Risk,"
Econometric Society, vol. 47(2), pages 263-291, March.
- Amos Tversky & Daniel Kahneman, 1979. "Prospect Theory: An Analysis of Decision under Risk," Levine's Working Paper Archive 7656, David K. Levine.
- Hirshleifer, David, 2001.
"Investor Psychology and Asset Pricing,"
5300, University Library of Munich, Germany.
- Amos Tversky & Daniel Kahneman, 1991. "Loss Aversion in Riskless Choice: A Reference-Dependent Model," The Quarterly Journal of Economics, Oxford University Press, vol. 106(4), pages 1039-1061.
- Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, 03.
- Steinbacher, Matjaz, 2009. "The Role of Liquidity Individuals in the Decision-Making," MPRA Paper 13566, University Library of Munich, Germany.
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