The Capital Asset Pricing Model (CAPM) and the mean-variance (M-V)
rule, which are based on classic expected utility theory, have been
heavily criticized theoretically and empirically. The advent of
behavioral economics, prospect theory and other psychology-minded
approaches in finance challenges the rational investor model from
which CAPM and M-V derive. Haim Levy argues that the tension between
the classic financial models and behavioral economics approaches is
more apparent than real. This book aims to relax the tension between
the two paradigms. Specifically, Professor Levy shows that although
behavioral economics contradicts aspects of expected utility theory,
CAPM and M-V are intact in both expected utility theory and cumulative
prospect theory frameworks. There is furthermore no evidence to reject
CAPM empirically when ex-ante parameters are employed. Professionals
may thus comfortably teach and use CAPM and behavioral economics or
cumulative prospect theory as coexisting paradigms.
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Produktdetaljer
ISBN
9781139179744
Publisert
2013
Utgave
1. utgave
Utgiver
Vendor
Cambridge University Press
Språk
Product language
Engelsk
Format
Product format
Digital bok
Forfatter