Loss-averse preferences and portfolio choices: An extension ?
Downside loss-averse preferences are integrated into the expected utility model. Unequivocal predictions for the impact of changes in risk on risk taking are derived. A link between prudence, higher-order risk attitudes and loss-aversion emerges. Loss-averse behaviours are consistent with VaR and CVaR as risk measures.
utility theory risk management decision analysis uncertainty modelling stochastic dominance