“I follow a disciplined approach to investing. When a stock has appreciated by 15% I sell it. I also sell when it has declined by 25% from initial purchase price.”
The client is most likely behaving consistently with:
Prospect Theory, Expected Utility Theory, or Behavioral Portfolio Theory?
I chose Prospect Theory based on the loss aversion present in prospect theory. However, the correct answer is expected utility theory. It says that “Loss-aversion in prospect theory is discussed from a different perspective.”
Can someone then explain to me what perspective prospect theory approaches loss aversion from? What even is prospect theory?
The client is most likely behaving consistently with:
Prospect Theory, Expected Utility Theory, or Behavioral Portfolio Theory?
I chose Prospect Theory based on the loss aversion present in prospect theory. However, the correct answer is expected utility theory. It says that “Loss-aversion in prospect theory is discussed from a different perspective.”
Can someone then explain to me what perspective prospect theory approaches loss aversion from? What even is prospect theory?