Unraveling the Disposition Effect: The Role of Prospect Theory and Emotions

2007 ◽  
Author(s):  
Barbara Summers ◽  
Darren Duxbury
Keyword(s):  
Prospect Theory ◽  
Disposition Effect

scholarly journals Momentum and the Disposition Effect: The Role of Individual Investors

2010 ◽  
Vol 39 (3) ◽  
pp. 1155-1176 ◽  
Author(s):  
Jungshik Hur ◽  
Mahesh Pritamani ◽  
Vivek Sharma
Keyword(s):  
Disposition Effect ◽  
Individual Investors

scholarly journals Kahenman and Tversky’s Research on Heuristics and Its Application to Junior Athletic Development and the College Recruiting Process

2017 ◽  
Vol 7 (2) ◽  
pp. 23
Author(s):  
Brendan M. Ryan
Keyword(s):  
Prospect Theory ◽  
Recruitment Process ◽  
College Recruitment ◽  
Junior Athletes ◽  
Individual Use ◽  
Athletic Development ◽  
Rational Decisions

This paper will apply the work of Amos Tversky and Daniel Kahneman in Prospect theory to the college recruiting process. Prospect theory challenges one of the fundamental ideas of Economics; humans are rational creatures and make rational decisions. The theory demonstrates that in fact, often humans do not make rational decisions and are instead subject to “heuristics”. Heuristics are mental shortcuts individual use to solve problems. The paper will both explain heuristics, as well as demonstrate how coaches, administrators, and junior athletes should be aware of the role of heuristics in both long-termdevelopments, as well as the college recruitment process.

Efficiency and the Disposition Effect in NFL Prediction Markets

2012 ◽  
Vol 02 (03) ◽  
pp. 1250013 ◽  
Author(s):  
Samuel M. Hartzmark ◽  
David H. Solomon
Keyword(s):  
Prospect Theory ◽  
Cognitive Dissonance ◽  
Mean Reversion ◽  
Disposition Effect ◽  
Prediction Markets ◽  
Short Term ◽  
Expected Return ◽  
News Events ◽  
Time Inconsistent ◽  
Gambling Market

Examining NFL betting contracts at Tradesports.com, we find mispricing consistent with the disposition effect, where investors are more likely to close out profitable positions than losing positions. Prices are too low when teams are ahead and too high when teams are behind. Returns following news events exhibit short-term reversals and longer-term momentum. These results do not appear driven by liquidity or non-financial reasons for trade. Finding the disposition effect in a negative expected return gambling market questions standard explanations for the effect (belief in mean reversion, prospect theory). It is consistent with cognitive dissonance, and models with time-inconsistent behavior.

scholarly journals Primate anterior insular cortex represents economic decision variables postulated by Prospect theory

2020 ◽  
Author(s):  
You-Ping Yang ◽  
Xinjian Li ◽  
Veit Stuphorn
Keyword(s):  
Prospect Theory ◽  
Reference Point ◽  
Contextual Information ◽  
Insular Cortex ◽  
Risk Attitude ◽  
Risky Decision ◽  
Anterior Insular Cortex ◽  
Decision Variables ◽  
Gain Loss

AbstractIn humans, risk attitude is highly context-dependent, varying with wealth levels or for different potential outcomes, such as gains or losses. These behavioral effects are well described by Prospect Theory, with the key assumption that humans represent the value of each available option asymmetrically as gain or loss relative to a reference point. However, it remains unknown how these computations are implemented at the neuronal level. Using a new token gambling task, we found that macaques, like humans, change their risk attitude across wealth levels and gain/loss contexts. Neurons in their anterior insular cortex (AIC) encode the ‘reference point’ (i.e. the current wealth level of the monkey) and the ‘asymmetric value function’ (i.e. option value signals are more sensitive to change in the loss than in the gain context) as postulated by Prospect Theory. In addition, changes in the activity of a subgroup of AIC neurons are correlated with the inter-trial fluctuations in choice and risk attitude. Taken together, we find that the role of primate AIC in risky decision-making is to monitor contextual information used to guide the animal’s willingness to accept risk.

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