Fixed versus variable reference points in the risk-return relationship

Article Abstract:

The usual assumption by economics researchers applying the prospect theory in explaining E.H. Bowman's risk-return paradox, of a single fixed reference point in defining the two decision contexts of gain and loss is incorrect. Findings reveal that this reference point is higher than the industry median performance and changes with time and across industries independent of industry performance. In agreement with prospect theory, companies above the reference point dislike risk and those below are risk takers.

Analysis

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Testing risk aversion and nonexpected utility theories

Article Abstract:

An evaluation of risk aversion and other nonexpected utility theories was undertaken through the utilization of paired comparisons. The inapplicability of economic hypothesis involving risk aversion was established over preference data. On the other hand, the effectiveness of expected utility with rank dependent probability in characterizing preference for various preference types was proven.

Economics, Research and Development in the Social Sciences and Humanities, Models, Economic aspects, Consumer preferences, Utility theory, Utility functions

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Comparing alternative explanations for accounting risk-return relations

Article Abstract:

Agency theory can be used to understand accounting risk-return relations using US manufacturing firms, and two separate economic environments to test the theory.

Management Theory & Techniques, Manufacturing industry, Manufacturing industries, Management, Agency theory

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