Pim van Vliet – A Detailed Dive into Low Volatility Investing (S6E10)
Flirting with Models
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The Importance of Expected Utility Theory in Asset Pricing Theory
In 2013 you co-authored a rather heady paper titled violations of cumulative prospect theory in mixed gambles with moderate probabilities. Your core takeaway was that prospect theory only supported when experiments are performed with really extreme examples not necessarily supported with more moderated examples. What do you think this takeaway is really important and what are the implications for asset pricing theory? yeah so good prospect theory has been the darling for decades basically wanting to replace utility theory but we're more rational in that sense than a prospect theory wants us to believe, he says.
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