2013-05-06Buch DOI: 10.18452/4463
Reference Dependent Preferences and the EPK Puzzle
Härdle, Wolfgang Karl
Supported by several recent investigations, the empirical pricing kernel (EPK) puzzle might be considered a stylized fact. Based on an economic model with state dependent preferences for the financial investors, we want to emphasize a microeconomic view that succeeds in explaining the puzzle. We retain the expected utility framework in a one period model and illustrate the case when the state is defined with respect to a reference point. We further investigate how the model relates the shape of the EPK to the economic conditions.
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Is Part Of Series: Sonderforschungsbereich 649: Ökonomisches Risiko - 23, SFB 649 Papers, ISSN:1860-5664