An Empirical Study on Value Functions of Stock Markets

Abstract:

Article Preview

As a core component of the prospect theory, a value function is employed to characterize the subjective experience of a decision-maker’s gain or loss. Previous empirical studies of the prospect theory were largely carried out through psychological experiments on individual decision-makers. In this paper, taking the whole stock market as an entity, we use the flow of information extracted by EGARCH Model as the proxy variable of change in wealth, and then use a two-stage power function as the representation of the value function to study the daily return data from the stock markets of 10 countries or regions. Empirical results show that the value functions of all the 10 stock markets present the shape of inverse-S, instead of the S-Shape of the value function generated by most psychological experiments on individuals.

Info:

Periodical:

Advanced Materials Research (Volumes 204-210)

Edited by:

Helen Zhang, Gang Shen and David Jin

Pages:

899-906

DOI:

10.4028/www.scientific.net/AMR.204-210.899

Citation:

F. H. Wen et al., "An Empirical Study on Value Functions of Stock Markets", Advanced Materials Research, Vols. 204-210, pp. 899-906, 2011

Online since:

February 2011

Export:

Price:

$35.00

In order to see related information, you need to Login.

In order to see related information, you need to Login.