6533b7dafe1ef96bd126f44a
RESEARCH PRODUCT
Portfolio performance evaluation with loss aversion
Valeriy Zakamulinsubject
Actuarial sciencemedia_common.quotation_subjectDecision theoryBehavioral economicsMeasure (mathematics)Spectral risk measureLoss aversionEconometricsEconomicsPortfolioPerformance measurementFunction (engineering)General Economics Econometrics and FinanceFinancemedia_commondescription
In this paper we consider a loss-averse investor equipped with a specific, but still quite general, utility function motivated by behavioral finance. We show that, under certain concrete assumptions concerning the form of this utility, one can derive closed-form solutions for the investor's portfolio performance measure. We investigate the effects of loss aversion and demonstrate its important role in performance measurement. The framework presented in this paper also provides a sound theoretical foundation for all known performance measures based on partial moments of the distribution.
| year | journal | country | edition | language |
|---|---|---|---|---|
| 2011-11-03 | Quantitative Finance |