Investors’ Risk Preference Characteristics Based on Different Reference Point
Taking the stock market as a whole object, we assume that prior losses and gains are two different factors that can influence risk preference separately. The two factors are introduced as separate explanatory variables into the time-varying GARCH-M (TVRA-GARCH-M) model. Then, we redefine prior losse...
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| Main Authors: | , , , |
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| Format: | Article |
| Language: | English |
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Wiley
2014-01-01
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| Series: | Discrete Dynamics in Nature and Society |
| Online Access: | http://dx.doi.org/10.1155/2014/158386 |
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| _version_ | 1832563414021439488 |
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| author | Fenghua Wen Zhifang He Xu Gong Aiming Liu |
| author_facet | Fenghua Wen Zhifang He Xu Gong Aiming Liu |
| author_sort | Fenghua Wen |
| collection | DOAJ |
| description | Taking the stock market as a whole object, we assume that prior losses and gains are two different factors that can influence risk preference separately. The two factors are introduced as separate explanatory variables into the time-varying GARCH-M (TVRA-GARCH-M) model. Then, we redefine prior losses and gains by selecting different reference point to study investors’ time-varying risk preference. The empirical evidence shows that investors’ risk preference is time varying and is influenced by previous outcomes; the stock market as a whole exhibits house money effect; that is, prior gains can decrease investors’ risk aversion while prior losses increase their risk aversion. Besides, different reference points selected by investors will cause different valuation of prior losses and gains, thus affecting investors’ risk preference. |
| format | Article |
| id | doaj-art-295ed3f31aa8476ca294449ac1c45339 |
| institution | Kabale University |
| issn | 1026-0226 1607-887X |
| language | English |
| publishDate | 2014-01-01 |
| publisher | Wiley |
| record_format | Article |
| series | Discrete Dynamics in Nature and Society |
| spelling | doaj-art-295ed3f31aa8476ca294449ac1c453392025-02-03T01:20:14ZengWileyDiscrete Dynamics in Nature and Society1026-02261607-887X2014-01-01201410.1155/2014/158386158386Investors’ Risk Preference Characteristics Based on Different Reference PointFenghua Wen0Zhifang He1Xu Gong2Aiming Liu3School of Business, Central South University, Changsha, Hunan 410083, ChinaSchool of Business, Central South University, Changsha, Hunan 410083, ChinaSchool of Business, Central South University, Changsha, Hunan 410083, ChinaSchool of Business, Central South University, Changsha, Hunan 410083, ChinaTaking the stock market as a whole object, we assume that prior losses and gains are two different factors that can influence risk preference separately. The two factors are introduced as separate explanatory variables into the time-varying GARCH-M (TVRA-GARCH-M) model. Then, we redefine prior losses and gains by selecting different reference point to study investors’ time-varying risk preference. The empirical evidence shows that investors’ risk preference is time varying and is influenced by previous outcomes; the stock market as a whole exhibits house money effect; that is, prior gains can decrease investors’ risk aversion while prior losses increase their risk aversion. Besides, different reference points selected by investors will cause different valuation of prior losses and gains, thus affecting investors’ risk preference.http://dx.doi.org/10.1155/2014/158386 |
| spellingShingle | Fenghua Wen Zhifang He Xu Gong Aiming Liu Investors’ Risk Preference Characteristics Based on Different Reference Point Discrete Dynamics in Nature and Society |
| title | Investors’ Risk Preference Characteristics Based on Different Reference Point |
| title_full | Investors’ Risk Preference Characteristics Based on Different Reference Point |
| title_fullStr | Investors’ Risk Preference Characteristics Based on Different Reference Point |
| title_full_unstemmed | Investors’ Risk Preference Characteristics Based on Different Reference Point |
| title_short | Investors’ Risk Preference Characteristics Based on Different Reference Point |
| title_sort | investors risk preference characteristics based on different reference point |
| url | http://dx.doi.org/10.1155/2014/158386 |
| work_keys_str_mv | AT fenghuawen investorsriskpreferencecharacteristicsbasedondifferentreferencepoint AT zhifanghe investorsriskpreferencecharacteristicsbasedondifferentreferencepoint AT xugong investorsriskpreferencecharacteristicsbasedondifferentreferencepoint AT aimingliu investorsriskpreferencecharacteristicsbasedondifferentreferencepoint |