Does risk seeking drive stock prices? A stochastic dominance analysis of aggregate investor preferences and beliefs

Review of Financial Studies

Volumn 18, Issue 3, 2005, Pages 925-953

  Post, Thierry ^a   Levy, Haim ^b  

^a ERASMUS UNIVERSITY ROTTERDAM   (Netherlands)

^b HEBREW UNIVERSITY OF JERUSALEM   (Israel)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 24044467787     PISSN: 08939454     EISSN: None     Source Type: Journal    
DOI: 10.1093/rfs/hhi021     Document Type: Review

References (40)

1. Barberis, N., and M. Huang, 2001, "Mental Accounting, Loss Aversion, and Individual Stock Returns," Journal of Finance, 56, 1247-1292.
2. Barberis, N., M. Huang, and T. Santos, 2001, "Prospect Theory and Asset prices," Quarterly Journal of Economics, 116, 1-53.
3. Benartzi, S., and R. H. Thaler, 1995, "Myopic Loss Aversion and the Equity Premium Puzzle," Quarterly Journal of Economics, 110, 73-92.
4. Berk, J., 1997, "Necessary Conditions for the CAPM," Journal of Economic Theory, 73, 245,257.
5. Brennan, M. J., 1993, "Agency and Asset Pricing, Anderson Graduate School of Management Finance." Working Paper 6-93, http://repositories. cdlib.org/anderson/fin/6-93.
6. Carhart, M. M., 1997, "On Persistence in Mutual Fund Performance," Journal of Finance, 521, 57-82.
7. Carhart, M. M., R. J. Krail, R. I. Stevens, and K. E. Welch, 1996, "Testing the Conditional CAPM," Unpublished manuscript, University of Chicago.
8. Dittmar, R., 2002, "Nonlinear Pricing Kernels, Kurtosis Preference, and Evidence from the Cross-Section of Equity Returns," Journal of Finance, 57, 369-403.
9. Dybvig, P., and S. Ross, 1982, "Portfolio Efficient Sets," Econometrica, 50, 1525-1546.
10. Efron, B., 1979, "Bootstrap Methods: Another Look at the Jackknife," Annals of Statistics, 7, 1-26.
11. Efron, B., and G. Gong, 1983, "A Leisurely Look at the Bootstrap, the Jackknife, and Cross Validation," The American Statistician, 37, 36-48.
12. Fama, E. F., and K. R. French, 1992, "The Cross-Section of Expected Stock Returns," Journal of Finance, 47, 427-465.
13. Fama, E. F., and K. R. French, 1993, "Common Risk Factors in the Returns on Stocks and Bonds," Journal of Financial Economics, 33, 3-56.
14. Friedman, M., and L. J. Savage, 1948, "The Utility Analysis of Choices Involving Risk," Journal of Political Economy, 56, 279-304.
15. Friend, I., and R. Westerfield, 1980, "Co-Skewness and Capital Asset Pricing," Journal of Finance, 35, 897-913.
16. Ghysels, E., 1998, "On Stable Factor Structures in the Pricing of Risk: Do Time-Varying Betas Help or Hurt?" Journal of Finance, 53, 549-573.
17. Hansen, L. P., 1982, "Large Sample Properties of Generalized Method of Moments estimators," Econometrica, 50, 1029-1084.
18. Hartley, R., and L. Farrell, 2002, "Can Expected Utility Theory Explain Gambling?" American Economic Review, 92, 613-624.
19. Harvey, C. R., and A. Siddique, 2000, "Conditional Skewness in Asset Pricing Tests," Journal of Finance, 55, 1263-1295.
20. Horst, R., and P. M. Pardalos, 1995, Handbook of Global Optimization, Kluwer, Dordrecht.
21. Jegadeesh, N., and S. Titman, 1993, "Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency," Journal of Finance, 48, 65-91.
22. Kahneman, D., and A. Tversky, 1979, "Prospect Theory: an Analysis of Decision Making Under Risk," Econometrica, 47, 263-291.
23. Kuosmanen, T., 2004, "Efficient Diversification According to Stochastic Dominance Criteria," Management Science, 10, 1390-1406.
24. Kraus, A., and R. Litzenberger, 1976, "Skewness Preference and the Valuation of Risk Assets," Journal of Finance, 31, 1085-1100.
25. Levy, H., 1998, Stochastic Dominance. Kluwer Academic Publishers, Norwell, MA.
26. Levy, M., and H. Levy, 2002, "Prospect Theory: Much Ado about Nothing?," Management Science, 48, 1334-1349.
27. Levy, H., and Z. Wiener, 1998, "Stochastic Dominance and Prospect Dominance With Subjective Weighting Functions," Journal of Risk and Uncertainty, 16, 147-163.
28. Lintner, J., 1965, "Security Prices, Risk And Maximal Gains from Diversification," Journal of Finance, 20, 587-615.
29. Markowitz, H. M., 1952, "The Utility of Wealth," Journal of Political Economy, 60, 151-158.
30. Mehra, R., and C. P. Edward, 1985, "The Equity Premium: a Puzzle," Journal of Monetary Economics, 15, 145-162.
31. Post, T., 2003, "Empirical Tests For Stochastic Dominance Efficiency," Journal of Finance, 58, 1905-1932.
32. Post, Thierry, van Vliet, Pim and Levy, Haim, "Risk Aversion and Skewness Preference" (December 2004). ERIM Report Series Reference No. ERS-2003-009-F&A. http://ssrn.com/abstract=411660
33. Rubinstein, M., 1974, "An Aggregation Theorem for Securities Markets," Journal of Financial Economics, 1, 225-244.
34. Russell, W. R., and T. K. Seo, 1989, "Representative Sets for SD Rules" in Studies in the Economics of Uncertainty: In Honor of Jozef Hadar, Springer, 59-76.
35. Sharpe, W. F., 1964, "Capital Asset Prices: a Theory of Market Equilibrium Under Conditions of Risk," Journal of Finance, 19, 425-442.
36. Sharpe, W. F., 1991, "Capital Asset Prices with and without Negative Holdings," Journal of Finance, 64, 489-509.
37. Shefrin, H., and M. Statman, 2000, "Behavioral Portfolio Theory," Journal of Financial and Quantitative Analysis, 35, 127-151.
38. Starmer, C, 2000, "Developments in Non-Expected Utility Theory: the Hunt for a Descriptive Theory Of Choice Under Risk," Journal of Economic Literature, 38, 332-382.
39. Tversky, A., and D. Kahneman, 1992, "Advances in Prospect Theory: Cumulative Representation of Uncertainty," Journal of Risk and Uncertainty, 5, 297-323.
40. Wang, Z., 1998, "Efficiency Loss and Constraints on Portfolio Holdings," Journal of Financial Economics, 48, 359-375.