skip to primary navigationskip to content
 

Cambridge Finance Workshop - David Hobson

Cambridge Finance Workshop Series are usually held on Thursdays during term time. The workshops are an opportunity for those working in finance to present their latest results or papers.
When Jan 22, 2015
from 12:30 PM to 01:30 PM
Where Lecture Theatre 3, Cambridge Judge Business School
Contact Name
Contact Phone 01223768129
Add event to calendar vCal
iCal

Professor David Hobson is a Deputy Head, Department of Statistics, University of Warwick.

Prof Hobson

 

Title:

Randomized Strategies and Prospect Theory in a Dynamic Context

Abstract:

Cumulative prospect theory (CPT) helps explain many features of individuals' attitudes to risk. But, as observed by Barberis (2012), in a dynamic setting the probability weighting of CPT leads to time inconsistency. It also leads to another feature which has not been considered to date - agents may prefer randomized strategies to pure strategies. In this paper we consider the impact of allowing CPT agents to follow randomized strategies.

 

In the discrete-time, discrete-space model of gambling in a casino of Barberis (2012) we show that allowing randomized strategies leads to significant value gains. In a continuous-time, continuous-space model of Ebert and Strack (2014) we show that allowing randomization can significantly change the predictions of the model. Ebert and Strack show that a naive investor with CPT preferences never chooses to stop and gambles until the bitter end. We show that this extreme conclusion is no longer valid if the agent has a coin in his pocket.

 

This is joint work with Vicky Henderson and Alex Tse (Warwick)

Paper and Abstract on SSRN

 

 

 

 

 

More information about this event…

« May 2018 »
May
MoTuWeThFrSaSu
123456
78910111213
14151617181920
21222324252627
28293031

RSS Feed Latest news

Best Student Paper Award 2018 - registration is now closed

Feb 02, 2018

For the last ten years, Cambridge Finance is offering its Best Student Paper Award. The award comprises a cash honorarium of £1,000 and a certificate is awarded to the author of the best student paper in finance presented during the 2017-2018 academic year.

View all news

Upcoming events

Cambridge Finance Workshop - Hui Chen (MIT)

May 31, 2018

Room W4.03, Cambridge Judge Business School

Previous events

Upcoming events