Probability distortion and non-participation

被引：1

作者：

Wang, Lunyi ^{[1
]}

Wang, Yao ^{[2
]}

Zhang, Shunming ^{[2
]}

机构：

[1] Beihang Univ, Sch Econ & Management, Beijing 100191, Peoples R China

[2] Renmin Univ China, Sch Finance, Beijing 100872, Peoples R China

来源：

ECONOMICS LETTERS | 2024年 / 244卷

基金：

中国国家自然科学基金;

关键词：

Rank dependent utility; Probabilistic premium; Non-participation; MARKET PARTICIPATION;

D O I：

10.1016/j.econlet.2024.111989

中图分类号：

F [经济];

学科分类号：

02 ;

摘要：

This paper explores the impact of probability distortion on investors' participation decisions and market performance. Specifically, we construct a one-period investment model with two types of investors-probabilistic pessimistic and neutral investors. The former assign more weight to bad outcomes and tail events when making decisions. Our findings suggest that non-participation arises from these probabilistic pessimistic investors. In equilibrium, their participation decisions affect the asset premium, which can be decomposed into the risk premium and probabilistic premium.

引用

页数：6

共 15 条

[1] Gender, stock market participation and financial literacy [J].

Almenberg, Johan ;

Dreber, Anna .

ECONOMICS LETTERS, 2015, 137 :140-142

[2] Asset pricing with heterogeneous consumers and limited participation: Empirical evidence [J].

Brav, A ;

Constantinides, GM ;

Geczy, CC .

JOURNAL OF POLITICAL ECONOMY, 2002, 110 (04) :793-824

[3] Model uncertainty, limited market participation, and asset prices [J].

Cao, HH ;

Wang, T ;

Zhang, HH .

REVIEW OF FINANCIAL STUDIES, 2005, 18 (04) :1219-1251

[4] Rational asset prices [J].

Constantinides, GM .

JOURNAL OF FINANCE, 2002, 57 (04) :1567-1591

[5] Household Portfolio Underdiversification and Probability Weighting: Evidence from the Field [J].

Dimmock, Stephen G. ;

Kouwenberg, Roy ;

Mitchell, Olivia S. ;

Peijnenburg, Kim .

REVIEW OF FINANCIAL STUDIES, 2021, 34 (09) :4524-4563

[6] Ambiguity and Nonparticipation: The Role of Regulation [J].

Easley, David ;

O'Hara, Maureen .

REVIEW OF FINANCIAL STUDIES, 2009, 22 (05) :1817-1843

[7] Prudence attitude and limited participation [J].

Huang, Helen ;

Wang, Yanjie ;

Zhang, Shunming .

ECONOMIC MODELLING, 2021, 101

[8] Asset pricing for the lottery-like security under probability weighting: Based on generalized Wang transform [J].

Huang, Helen Hui ;

Sun, Jianchun ;

Zhang, Shunming .

NORTH AMERICAN JOURNAL OF ECONOMICS AND FINANCE, 2024, 71

[9] The probability weighting function [J].

Prelec, D .

ECONOMETRICA, 1998, 66 (03) :497-527

[10] A THEORY OF ANTICIPATED UTILITY [J].

QUIGGIN, J .

JOURNAL OF ECONOMIC BEHAVIOR & ORGANIZATION, 1982, 3 (04) :323-343

← 1 2 →