Prospect Theory and the Size and Value Premium Puzzles

descriptionPublicationkeyboard_double_arrow_right Article , Conference object , Other literature type , Research , Preprint 01 Jan 2005 Netherlands, Norway English Publisher:Elsevier BVJournal:SSRN Electronic Journal (eissn: 1556-5068,

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Authors: De Giorgi, Enrico; Hens, Thorsten; Post, Thierry;

doi: 10.2139/ssrn.970470

handle: 11250/163757

Prospect Theory and the Size and Value Premium Puzzles

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Abstract

Using canonical data for the US stock and bond markets, we show that the kinked piecewise exponential value function can rationalize the cross-section of stock returns in addition to the level of the equity premium, while the kinked piecewise-power value function of Tversky and Kahneman can explain only the latter.

Countries

Netherlands, Norway

Related Organizations

University of Zurich
Switzerland
Erasmus University Rotterdam
Netherlands
Swiss Finance Institute
Switzerland
University of St. Gallen
Switzerland
Swiss Finance Institute

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Keywords

EUR ESE 33, Prospect Theory; Premium Puzzles, jel: jel:G00

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