Stott , Henry P.. (2006) Cumulative prospect theory's functional menagerie. Journal of Risk and Uncertainty, Vol.32 (No.2). pp. 101-130. ISSN 0895-5646

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Abstract

Many different functional forms have been suggested for both the value function and probability weighting function of Cumulative Prospect Theory (Tversky and Kahneman, 1992). There are also many stochastic choice functions available. Since these three components only make predictions when considered in combination, this paper examines the complete pattern of 256 model variants that can be constructed from twenty functions. All these variants are fit to experimental data and their explanatory power assessed. Significant interaction effects are observed. The best model has a power value function, a risky weighting function due to Prelec (1998), and a Logit function.

Item Type:	Journal Article
Subjects:	H Social Sciences > HG Finance H Social Sciences > HC Economic History and Conditions
Journal or Publication Title:	Journal of Risk and Uncertainty
Publisher:	Springer New York LLC
ISSN:	0895-5646
Date:	March 2006
Volume:	Vol.32
Number:	No.2
Number of Pages:	30
Page Range:	pp. 101-130
Identification Number:	10.1007/s11166-006-8289-6
Status:	Peer Reviewed
Publication Status:	Published
Access rights to Published version:	Restricted or Subscription Access
URI:	http://wrap.warwick.ac.uk/id/eprint/33546

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