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| Type | Working Paper |
| Scope | Discipline-based scholarship |
| Title | Prospect Theory and the CAPM: A contradiction or coexistence? |
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| Institution | University of Zurich |
| Series Name | Working paper series / Institute for Empirical Research in Economics |
| Number | No. 157 |
| ISSN | 1424-0459 |
| Date | 2003 |
| Abstract Text | Under the assumption of normally distributed returns, we analyzenwhether the Cumulative Prospect Theory of Tversky and Kahneman (1992)nis consistent with the Capital Asset Pricing Model. We find that in everynfinancial market equilibrium the Security Market Line Theorem holds.nHowever, under the specific functional form suggested by Tversky andnKahneman (1992) financial market equilibria do not exist. We suggest annalternative functional form that is consistent with both, the experimentalnresults of Tversky and Kahneman and also with the existence of equilibria. |
| Official URL | http://www.econ.uzh.ch/wp.html |
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