行为金融学3课后习题答案.docVIP

PAGE 2 | Page PAGE ?2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly available website, in whole or in part. Chapter 3: Discussion Questions and Problems 1. Differentiate the following terms/concepts: a. Lottery and insurance A lottery is a prospect with a low probability of a high payoff. Many people buy lottery tickets, even with negative expected values. These same people buy insurance to protect themselves from risk. Normally, insurance is a hedge against a low-probability large loss. These choices are inconsistent with traditional expected utility framework but can be explained by prospect theory. b. Segregation and integration Integration occurs when positions are lumped together, while segregation occurs when situations are viewed one at a time. c. Risk aversion and loss aversion A person who is risk averse prefers the expected value of a prospect to the prospect itself, whereas for a person who is loss averse, losses loom larger than gains. d. Weighting function and event probability Event probability is simply the subjective view on how likely an event is. The weighting function is associated with the probability of an outcome, but is not strictly the same as the probability as in expected utility theory. 2. According to prospect theory, which is preferred? a. Prospect A or B? Decision (i). Choose between: A(0.80, $50, $0)and B(0.40, $100, $0) Prospect A is preferred due to risk aversion for gains. While both have the same expected change in wealth, A has less risk. b. Prospect C or D? Decision (ii). Choose between: C(0.00002, $500,000, $0) and D(0.00001, $1,000,000, $0) Prospect D, with more risk, is preferred due to the risk seeking that occurs when there are very low probabilities of positive payoffs. c. Are these choices consistent with expected utility theory? Why or why not? Violation of EU theory because preferences are inconsistent. The same sort