This paper presents a behavioral portfolio selection model with time discounting preference. Firstly, we discuss the portfolio selection problem and then modify this model based on cumulative prospect theory (CPT) as well as considering investors’ time discounting preference in psychology. Furthermore, an analytical solution with satisfying behavior is given for our proposed model, the results show that when investors’ goals are very ambitious, they put a high proportion of their wealth in long-term goals and adopt aggressive investment strategies with high leverage to reach short-term goals and the overall investment strategy also displays high leverage. Finally, numerical analysis is given and it is shown that investor who tends to future bias performs adequate confidence and patience whereas investor with present bias is apt to the immediate interests.
Mots clés : Time discounting, portfolio choice, satisfying behavior, analytical solution
@article{RO_2018__52_3_691_0,
author = {Yang, Guang and Liu, Xinwang and Qin, Jindong and Khan, Ahmed},
title = {An analytical approach for behavioral portfolio model with time discounting preference},
journal = {RAIRO - Operations Research - Recherche Op\'erationnelle},
pages = {691--712},
publisher = {EDP-Sciences},
volume = {52},
number = {3},
year = {2018},
doi = {10.1051/ro/2017039},
mrnumber = {3868440},
zbl = {1419.91597},
language = {en},
url = {http://www.numdam.org/articles/10.1051/ro/2017039/}
}
TY - JOUR AU - Yang, Guang AU - Liu, Xinwang AU - Qin, Jindong AU - Khan, Ahmed TI - An analytical approach for behavioral portfolio model with time discounting preference JO - RAIRO - Operations Research - Recherche Opérationnelle PY - 2018 SP - 691 EP - 712 VL - 52 IS - 3 PB - EDP-Sciences UR - http://www.numdam.org/articles/10.1051/ro/2017039/ DO - 10.1051/ro/2017039 LA - en ID - RO_2018__52_3_691_0 ER -
%0 Journal Article %A Yang, Guang %A Liu, Xinwang %A Qin, Jindong %A Khan, Ahmed %T An analytical approach for behavioral portfolio model with time discounting preference %J RAIRO - Operations Research - Recherche Opérationnelle %D 2018 %P 691-712 %V 52 %N 3 %I EDP-Sciences %U http://www.numdam.org/articles/10.1051/ro/2017039/ %R 10.1051/ro/2017039 %G en %F RO_2018__52_3_691_0
Yang, Guang; Liu, Xinwang; Qin, Jindong; Khan, Ahmed. An analytical approach for behavioral portfolio model with time discounting preference. RAIRO - Operations Research - Recherche Opérationnelle, Tome 52 (2018) no. 3, pp. 691-712. doi : 10.1051/ro/2017039. http://www.numdam.org/articles/10.1051/ro/2017039/
[1] and , Building blocks of selfcontrol: Increased tolerance for delay with bundled rewards. J. Experimental Anal. Behavior 79 (2003) 37–48. | DOI
[2] , , , and , Measuring Discounting without Measuring Utility. Amer. Econ. Rev. 106 (2016) 1476–1494. | DOI
[3] , , and , Time-Tradeoff Sequences for Analyzing Discounting and Time Inconsistency. Manag. Sci. 56 (2010) 2015–2030. | DOI
[4] and , Stocks as lotteries: The implications of probability weighting for security prices. Amer. Econ. Rev. 98 (2008) 2066–2100. | DOI
[5] and , Myopic loss aversion and the equity premium puzzle. Quarterly J. Econ. 110 (1995) 73–92. | DOI | Zbl
[6] , and , Optimal portfolio choice under loss aversion. Rev. Econ. Statis. 86 (2004) 973–987. | DOI
[7] , Beta and return. J. Portfolio Management 20 (1993) 8–18. | DOI
[8] , F. and , Portfolio selection: efficient diversification of investments. Praeger, New York (1972)
[9] and , Satisficing measures for analysis of risky positions. Manag. Sci. 55 (2009) 71–84. | DOI | Zbl
[10] , Temporal discounting and utility for health and money. J. Experimental Psychology-Learing Memory and Cognition 22 (1996) 771–791. | DOI
[11] , , , , and , Value for the future and preventive health behavior. J. Experimental Psychology-Appl. 7 (2001) 235–250. | DOI
[12] and , Temporal discounting: Basic research and the analysis of socially important behavior. J. Appl. Behavior Anal. 34 (2001) 101–122. | DOI
[13] and , The cross-section of expected stock returns. J. Finance 47 (1992) 427–465.
[14] and , The CAPM is wanted, dead or alive. J. Finance 51 (1996) 1947–1958. | DOI
[15] , Portfolio choice and trading volume with loss-averse investors. J. Business 78 (2005) 675–706. | DOI
[16] and , Exponential versus hyperbolic discounting of delayed outcomes: Risk and waiting time. Amer. Zoologist 36 (1996) 496–505. | DOI
[17] , and , On the social dimension of time and risk preferences: An experimental study. Economic Inquiry 46 (2008) 261–272. | DOI
[18] , and Dynamic portfolio allocation, the dual theory of choice and probability distortion functions. Astin Bulletin 36 (2006) 187–217. | DOI | MR | Zbl
[19] and , Delay discounting determines delivery fees in an e-commerce simulation: A behavioral economic perspective. Psychology and Maketing 22 (2005) 153–161. | DOI
[20] and , Is the evidence for hyperbolic discounting in humans just an experimental artefact? Behavioral and Brain Sci. 28 (2005) 657.
[21] and Portfolio choice under cumulative prospect theory: An analytical treatment. Manag. Sci. 57 (2011) 315–331. | Zbl
[22] and Continuous-time behavioral portfolio selection. In 47th IEEE Conference on Decision and Control, CDC, IEEE Conference on Decision and Control (2008) 5602–5607.
[23] and Greed, leverage and potential losses: A prospect theory perspective. Math. Finance 23 (2013) 122–142. | DOI | MR | Zbl
[24] and , and : Brownian motion and stochastic calculus. Statist.Papers 30 (1989) 262. | Zbl
[25] and , Prospect theory and mean-variance analysis. Rev. Financial Studies 17 (2004) 1015–1041. | DOI
[26] , The Utility of Wealth. J. Political Economy 60 (1952) 151–158. | DOI
[27] , An analytic derivation of the efficient portfolio frontier. J. Financial and Quantitative Anal. 7 (1972) 1851–1872. | DOI
[28] and , Discounting of delayed rewards – Models of individual choice. J. Experimental Anal. Behavior 64 (1995) 263–276. | DOI
[29] , , and , Investigating intertemporal choice through experimental evolutionary robotics. Behavioural Processes 115 (2015) 1–18. | DOI
[30] , Decreasing impatience: A criterion for non-stationary time preference and “Hyperbolic” discounting. Scandinavian J. Econ. 106 (2004) 511–532. | DOI
[31] and , Continuous-time portfolio optimisation for a behavioural investor with bounded utility on gains. Electr. Commun. Probab. 19 (2014) 1–13. | MR | Zbl
[32] and , Time discounting in relation to career preferences. J. Vocational Behavior 58 (2001) 118–126. | DOI
[33] and , An investigation of time inconsistency. Mang. Sci. 55 (2009) 470–482. | DOI | Zbl
[34] , A simplified model for portfolio analysis. Manag. Sci. 9 (1963) 277–293. | DOI
[35] , Capital asset prices: A theory of market equilibrium under conditions of risk. J. Finance 19 (1964) 425–442.
[36] and , Is there time discounting for risk premium? J. Experimental Anal. Behavior 103 (2015) 393–404. | DOI
[37] and , Behavioral portfolio theory. J. Financial and Quantitative Anal. 35 (2000) 127–151. | DOI
[38] and , Pricing effects on foraging in a simulated Internet shopping mall. J. Econ. Psychology 24 (2003) 653–674. | DOI
[39] , Non-parametric test of time consistency: Present bias and future bias. Games and Economic Behavior 71 (2011) 456–478. | DOI | MR | Zbl
[40] , Liquidity preference as behavior towards risk. Rev. Econ. Studies 67 (1958) 65–86. | DOI
[41] and , Advances in prospect theory: Cumulative representation of uncertainty. J. Risk Uncertainty 5 (1992) 297–323. | DOI | Zbl
[42] and , Job search behaviour and time preferences: Testing exponential versus hyperbolic discounting. Econ.-Netherlands 162 (2014) 223–245.
[43] , , , and , Individual differences in self-control in a time discounting task: An fMRI study. J. Neuroscience Psychol. Econ. 7 (2014) 65–79. | DOI
[44] , The dual theory of choice under risk. Econ. 55 (1987) 99–115. | MR | Zbl
Cité par Sources :
