How Investors Face Financial Risk: Loss Aversion and Wealth Allocation

We studied how the capital allocation decisions and the loss version of nonprofessional investors change subject to behavioral factors. The optimal wealth allocation between risky and risk-free assets results within a value-at-risk (VaR) portfolio model, which involves assessing risk individually ac...

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Detalles Bibliográficos
Autores: Rengifo, Erick W., Trifan, Emanuela
Tipo de recurso: artículo
Fecha de publicación:2010
País:Perú
Institución:Pontificia Universidad Católica del Perú
Repositorio:PUCP-Institucional
Idioma:inglés
OAI Identifier:oai:repositorio.pucp.edu.pe:20.500.14657/194775
Acceso en línea:https://repositorio.pucp.edu.pe/index/handle/123456789/194775
Access Level:acceso abierto
Palabra clave:Capital Allocation
Myopic Loss Aversion
Portfolio Evaluation
Prospect Theory
Value-at-Risk
https://purl.org/pe-repo/ocde/ford#5.02.04
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spelling 2023-07-21T19:18:11Z2023-07-21T19:18:11Z2010https://repositorio.pucp.edu.pe/index/handle/123456789/194775We studied how the capital allocation decisions and the loss version of nonprofessional investors change subject to behavioral factors. The optimal wealth allocation between risky and risk-free assets results within a value-at-risk (VaR) portfolio model, which involves assessing risk individually according to an extended prospect-theory framework. We showed how the past performance and the portfolio evaluation frequency affect investor behavior and prove myopic loss aversion holds across different evaluation frequencies. We also illustrated that 1 year is the optimal evaluation horizon at which, under practical constraints, maximization of risky holdings occurs. Finally, we presented evidence that indicates that researchers using standard VaR significance levels may be underestimating the loss aversion of individual investors.engPontificia Universidad Católica del Perú. CENTRUMPEurn:issn:1851-6599info:eu-repo/semantics/openAccesshttp://creativecommons.org/licenses/by/4.0Journal of CENTRUM Cathedra, Vol. 3, Issue 1reponame:PUCP-Institucionalinstname:Pontificia Universidad Católica del Perúinstacron:PUCPCapital AllocationMyopic Loss AversionPortfolio EvaluationProspect TheoryValue-at-Riskhttps://purl.org/pe-repo/ocde/ford#5.02.04How Investors Face Financial Risk: Loss Aversion and Wealth Allocationinfo:eu-repo/semantics/articleArtículoRengifo, Erick W.Trifan, EmanuelaORIGINALJCC-3.1-37.pdfJCC-3.1-37.pdfTexto completoapplication/pdf401807https://repositorio.pucp.edu.pe/bitstreams/cb27d115-05a6-45df-bf4e-33e102948195/download6a0f1d0cd5b7ef6b3563cec95d37383fMD51trueAnonymousREADTHUMBNAILJCC-3.1-37.pdf.jpgWritten by FormatFilter org.dspace.app.mediafilter.ImageMagickPdfThumbnailFilter on 2023-07-21T20:31:56Z (GMT).IM Thumbnailimage/jpeg31561https://repositorio.pucp.edu.pe/bitstreams/27cf9112-6d82-48c7-8e45-78180a1846de/download86807c5738dd4dcfe684b9784dcb93e1MD52falseAnonymousREAD20.500.14657/194775oai:repositorio.pucp.edu.pe:20.500.14657/1947752025-04-11T14:58:18.046Zhttp://creativecommons.org/licenses/by/4.0info:eu-repo/semantics/openAccessopen.accesshttps://repositorio.pucp.edu.peRepositorio Institucional de la PUCPrepositorio@pucp.pe
dc.title.en_US.fl_str_mv How Investors Face Financial Risk: Loss Aversion and Wealth Allocation
title How Investors Face Financial Risk: Loss Aversion and Wealth Allocation
spellingShingle How Investors Face Financial Risk: Loss Aversion and Wealth Allocation
Rengifo, Erick W.
Capital Allocation
Myopic Loss Aversion
Portfolio Evaluation
Prospect Theory
Value-at-Risk
https://purl.org/pe-repo/ocde/ford#5.02.04
title_short How Investors Face Financial Risk: Loss Aversion and Wealth Allocation
title_full How Investors Face Financial Risk: Loss Aversion and Wealth Allocation
title_fullStr How Investors Face Financial Risk: Loss Aversion and Wealth Allocation
title_full_unstemmed How Investors Face Financial Risk: Loss Aversion and Wealth Allocation
title_sort How Investors Face Financial Risk: Loss Aversion and Wealth Allocation
dc.creator.none.fl_str_mv Rengifo, Erick W.
Trifan, Emanuela
author Rengifo, Erick W.
author_facet Rengifo, Erick W.
Trifan, Emanuela
author_role author
author2 Trifan, Emanuela
author2_role author
dc.subject.en_US.fl_str_mv Capital Allocation
Myopic Loss Aversion
Portfolio Evaluation
Prospect Theory
Value-at-Risk
topic Capital Allocation
Myopic Loss Aversion
Portfolio Evaluation
Prospect Theory
Value-at-Risk
https://purl.org/pe-repo/ocde/ford#5.02.04
dc.subject.ocde.none.fl_str_mv https://purl.org/pe-repo/ocde/ford#5.02.04
description We studied how the capital allocation decisions and the loss version of nonprofessional investors change subject to behavioral factors. The optimal wealth allocation between risky and risk-free assets results within a value-at-risk (VaR) portfolio model, which involves assessing risk individually according to an extended prospect-theory framework. We showed how the past performance and the portfolio evaluation frequency affect investor behavior and prove myopic loss aversion holds across different evaluation frequencies. We also illustrated that 1 year is the optimal evaluation horizon at which, under practical constraints, maximization of risky holdings occurs. Finally, we presented evidence that indicates that researchers using standard VaR significance levels may be underestimating the loss aversion of individual investors.
publishDate 2010
dc.date.accessioned.none.fl_str_mv 2023-07-21T19:18:11Z
dc.date.available.none.fl_str_mv 2023-07-21T19:18:11Z
dc.date.issued.fl_str_mv 2010
dc.type.none.fl_str_mv info:eu-repo/semantics/article
dc.type.other.none.fl_str_mv Artículo
format article
dc.identifier.uri.none.fl_str_mv https://repositorio.pucp.edu.pe/index/handle/123456789/194775
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dc.language.iso.none.fl_str_mv eng
language eng
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eu_rights_str_mv openAccess
rights_invalid_str_mv http://creativecommons.org/licenses/by/4.0
dc.publisher.none.fl_str_mv Pontificia Universidad Católica del Perú. CENTRUM
dc.publisher.country.none.fl_str_mv PE
publisher.none.fl_str_mv Pontificia Universidad Católica del Perú. CENTRUM
dc.source.es_ES.fl_str_mv Journal of CENTRUM Cathedra, Vol. 3, Issue 1
dc.source.none.fl_str_mv reponame:PUCP-Institucional
instname:Pontificia Universidad Católica del Perú
instacron:PUCP
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