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Behavioral portfolio selection in continuous time

Abstract:

This paper formulates and studies a general continuous-time behavioral portfolio selection model under Kahneman and Tversky's (cumulative) prospect theory, featuring S-shaped utility (value) functions and probability distortions. Unlike the conventional expected utility maximization model, such a behavioral model could be easily mis-formulated (a.k.a. ill-posed) if its different components do not coordinate well with each other. Certain classes of an ill-posed model are identified. A systemat...

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Publisher:
Blackwell Publishing Inc.
Publication date:
2008-01-01
DOI:
EISSN:
1467-9965
ISSN:
0960-1627
Source identifiers:
1899
Keywords:
Pubs id:
pubs:1899
UUID:
uuid:01f82bd1-c9e6-4e03-bad1-cb461e06db86
Local pid:
pubs:1899
Deposit date:
2012-12-19

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