A rational decision-maker would be indifferent to these options because they have the same expected, or average, value ($5). Yet, most people prefer the sure bet, a phenomenon known as risk aversion ...

Human adults tend to avoid risk. In behavioral economic studies, risk aversion is manifest as a preference for sure gains over uncertain gains. However, children tend to be less averse to risk than ...

With his late collaborator Amos Tversky of Stanford University, Professor Kahneman completely reframed how economics and finance define ... Prospect Theory — the researchers’ empirical exploration of ...

As Mehra and Prescott point out, it appears difficult to explain the magnitude of the equity premium within the usual economics paradigm because the level of risk aversion necessary to justify such a ...

This insight is crucial for investors, as it highlights the risk of placing too ... Here’s What You’ll Get Kahneman’s exploration into loss aversion reveals our asymmetric emotional response ...

"The assumption that individual investors are rational. That leads to serious mistakes." With Prospect Theory, the work for which Kahneman won the Nobel Prize, he proposed a change to the way we think ...

Recently much progress has been made in developing optimal portfolio choice models accomodating time-varying opportunity sets, but unless investors are unreasonably risk averse ... portfolio choice ...