Realization Utility with Reference-Dependent Preferences
We develop a tractable model of realization utility that studies the role of reference-dependent S-shaped preferences in a dynamic investment setting with reinvestment. Our model generates both voluntarily realized gains and losses. It makes specific predictions about the volume of gains and losses,...
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| Veröffentlicht in: | The Review of financial studies 2013-03, Vol.26 (3), p.723-767 |
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| container_end_page | 767 |
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| container_issue | 3 |
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| container_title | The Review of financial studies |
| container_volume | 26 |
| creator | Ingersoll, Jonathan E. Jin, Lawrence J. |
| description | We develop a tractable model of realization utility that studies the role of reference-dependent S-shaped preferences in a dynamic investment setting with reinvestment. Our model generates both voluntarily realized gains and losses. It makes specific predictions about the volume of gains and losses, the holding periods, and the sizes of both realized and paper gains and losses that can be calibrated to a variety of statistics, including Odean's measure of the disposition effect. Our model also predicts several anomalies, including, among others, the flattening of the capital market line and a negative price for idiosyncratic risk. |
| doi_str_mv | 10.1093/rfs/hhs116 |
| format | Article |
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| fulltext | fulltext |
| identifier | ISSN: 0893-9454 |
| ispartof | The Review of financial studies, 2013-03, Vol.26 (3), p.723-767 |
| issn | 0893-9454 1465-7368 |
| language | eng |
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| source | Business Source Complete; Jstor Complete Legacy; Oxford University Press Journals All Titles (1996-Current) |
| subjects | Financial investments Financial performance Investment policy Investors Marginal utility Preference utilitarianism Stock prices Stock sales Studies Trade Transaction costs Utility functions Utility rates |
| title | Realization Utility with Reference-Dependent Preferences |
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