"There is a powerful psychological theory called 'prospect theory
' which shows that when one is decision-making under uncertainty - which we are in an independence referendum since no one can be sure about the consequences - then the way things are framed is critical.
, the behavioral-economics model pioneered by Nobel laureates Daniel Kahneman and Amos Tversky, predicts that people will become less risk-averse if presented with only bad options.
, the behavioural-economics model pioneered by Nobel laureates Daniel Kahneman and Amos Tversky, predicts that people will become less risk-averse if presented with only bad options.
One of their theories is "prospect theory
", which states that "the pain of losing is 2 times greater than the pleasure of winning".
This is a fundamental principle in Behavioral Economics that was discussed in Prospect Theory
, the seminal study of Nobel Prize winner Daniel Kahneman and the late Amos Trevsky.
In "Prospect Theory
: An Analysis of Decision Under Risk," Daniel Kahneman and Amos Tversky showed that people often use rules of thumb rather than optimizing, rational calculus.
"Such changing trends could be interpreted from the perspective of 'prospect theory
'," said Psaltis.
Then, the prospect theory
is used to deal with this problem.
Cumulative Prospect Theory
(CPT), introduced by Tversky and Kahneman (1992), has become one of the most prominent behavioral theories in finance, especially as a behavioral counterpart to Expected Utility Theory (EUT).
Kahneman and Tversky's "(https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1505880) prospect theory
" is based upon a simple notion: Under conditions of uncertainty, people weigh loss much more than gain when making assessments about the future.
According to the prospect theory
, some psychological factors are involved in investment decision-making.
This tendency was so patternistic that he was able to use the data to develop Prospect Theory
, which charts out, on average, the premium people are willing to pay to avoid loss and risk.