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Fund Managers’ Risk Adjustment Behavior:The Viewpoint of Prospect Theory

Journal of Financial Studies

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Title Fund Managers’ Risk Adjustment Behavior:The Viewpoint of Prospect Theory
 
Creator Chun-An Li
Hui-Ko Chen
Chin-Chang Lin
 
Subject —
 
Description This paper develops a model from the viewpoint of “Prospect Theory” and uses it to investigate the relationship among fund managers’ overconfidence, promotion system and their risk adjustment behavior. Our results describe as follows. Fund managers will be conservative while under relative gain situation, and becoming speculative while under relative loss situation. The consideration of promotion system will let fund managers more speculative while under relative gain situation, and more conservative while under relative loss situation. The demonstration shows that when considering the mind of overconfidence, fund managers may increase their portfolio risk under relative gain situation; fund managers instead decrease their portfolio risk under relative loss situation. It means that promotion system and overconfidence both can affect fund managers’ portfolio risk choice, the key point is fund managers is relative winner or loser. Overall, our results suggest that only fund managers become relative winner or loser could they reveal self-interest risk adjustment behavior.Key words: Promotion system, Overconfidence, Prospect theory, Self-interest risk adjustment behavior
 
Publisher Journal of Financial Studies
財務金èžå­¸åˆŠ
 
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Date 2011-03-31
 
Type —
 
Format application/pdf
 
Identifier http://www.jfs.org.tw/index.php/jfs/article/view/2011087
 
Source Journal of Financial Studies; Vol 19, No 1 (2011); 33
財務金èžå­¸åˆŠ; Vol 19, No 1 (2011); 33
 
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