【投资学】Section1-The-Psychology-of-Preference课件

1、Section 1 The Psychology of PreferenceScientific American 264，PP 160173by Daniel Kahneman and Amos Tverskycontent1.1 Overview1.2 Risk aversion and Risk-seeking1.3 Value function1.4 Decision weights vs probability1.5 Framing effect1.6 Reference point1.7 Regret1.8 Conclusion1.1 OverviewWhen people mak

2、e risky choices, they do not do so objectively.Experiment: Broadway play lost the ticket (paid $40): buy another one? lost $40: Will you buy ticket? Interpretation: different mental accountDiscrepancies between subjective and objective conceptions of decisionsExamples: threat of loss vs equivalent g

3、ainSensitvie: Difference between certainly and high probabilityInsensitive :Difference between intermediate gradations of probabilityRegret with a loss by action and that of inaction 1.2 risk aversion and risk-seekingThe origin of psychology of preference Daniel Bernoulli (1738 ) discussed the chara

4、cteristics of human preferences: risk aversionExample: option 1: a sure gain of $ 80Option 2: risky prospect 85% winning $100,15% winning nothingA choice is risk-averse if a certain outcome is preferred to a gamble with an equal or greater monetary expectationExample:Option 1: a sure loss of $80Opti

5、on 2: a risky outcome85% losing $100 ,15% losing nothingA choice is risk-seeking if a certain outcome is rejected in favor of a gamble with an equal or lower monetary expectationConclusion Preference between gains are risk-aversePreference between losses are risk-seekingPeople forgo the option that

6、offers the highest monetary expectation. WHY?Bernoullis answer: expected utility utility is not a linear function of money1.3 Value functionHow do people identify the outcomes of a decision?States of wealth vs changes of wealthComprehensive view of vs limited view Identify consequences as gains or l

7、osses relative to a neutral point, which leads to inconsistent choices (because the same objective consequence can be evaluated in more than one way)Definition of value function: a function that associates a subjective value to any objective amount that may be gained or lost.Concave value function (

8、gains)Assumption:Gains have positive valueZero gains has a subjective value of zeroThe value function for gains are concave downward (each extra dollar gained adds less to value than the preceding one) Shallow region of the functionSteepest region of the functionValue is nonlinear ,the sure gain is

9、closer to the large gain in terms of value than in terms of moneyConvex value function (losses)Assumptions:Losses have negative valueThe value function for losses is convex (each extra dollar loss causes a smaller change in value than the preceding one)Flatter region of the functionSteepest region o

10、f the functionThe sure loss is relatively closer to the worst outcome on the value scale than it is on the money scaleMathematical estimationExample:A sure cash prize50% winning $100+ 50% winning nothingWhat amount would make the sure prize just as attractive as the bet?Value $35 vs half the value o

11、f $100 50% winning $200,$500,$1000,$2000The prize is roughly proportional to the stake Example50% losing $100 + 50% losing nothingWhat amount would make the sure loss just as acceptable as the bet?Value -$40 is half the value of -$100Power function is a good estimates-shaped value function(gain & lo

12、ss)Example50% losing $10050% winning a cash prizeWhat is the smallest prize that would make this bet acceptable ?Pleasure of winning a sum of money is much less intense than the pain of losing the same sumThe asymmetry in the response to gains and losses is expressed in the greater steepness of the

13、value function for losses.Individuals differ in their attitudes toward risk and toward money, therefore no single value function can describe the preferences of all individuals The near proportionality of prizes to stakes breaks down beyond the range of moderate gains and losses.1.4 decision weights

14、 vs probabilityExampleImagine that you can improve your chance to win a very desirable prize.Would you pay as much to raise your chance from 30% to 40% as you would to raise your chance from 90% to certainty?The difference between certainty and possibility and the difference between possibility and

15、impossibility loom larger than comparable differences in the intermediate range of probabilityOverweighted (low probability)Underweighted (intermediate and high probability)Impossibility weighted 0Certainty weighted 1The overweighting can lead to risk seeking in the positive domain Lottery and accid

16、ent insuranceThe underweighting can lead to risk aversion in the negative domainIf that is the case, the objective probability will be replaced by a slightly smaller decision weight.The value function would become less curved, still S shaped1.5 Framing effectHow people define the consequences of the

17、ir choice?The same decision can be framed in several different ways,Different frames can lead to different decisionsExampleYou have been given $200You are asked to choose A. a sure gain of $50 B. 25% winning $200+ 75% winning nothingA is prefered (risk averse)ExampleYou have been given $400You are a

18、sked to choose C. a sure loss of $150 D. 75% losing $200 +25% losing nothingD is preferred (risk seeking)In fact, the options in the above two problems is identical in objective termsThe choice of the gamble in either winning yields a 75% of winning $200 and 25% of winning $400.Rational decision: co

19、mbine the bonus with the available options .In fact, they ignore the bonus and evaluate the first one between gains and the second one between lossesThe reversal of preference is induced by altering the description of outcomes. We call such reversals framing effects.1.6 reference pointFraming effect

20、s arise when the same objective alternatives are evaluated in relation to different points of referenceExampleTwo alternative programs A.200 will be saved B. 1/3 600 will be saved + 2/3 no one savedA is preferred (risk averse)ExampleC. 400 dieD.1/3 no one dies + 2/3 600 dieD is preferred (risk seeki

21、ng)In fact, the above two versions is identicalThe first one takes death of 600 as RP and takes the lives saved as gainsThe second one takes no death as RP and takes the lives lost as lossBecause of the S-shaped value function and the overweighting of certainty, the frames yield different preference

22、sSingle dimension of valueSeveral dimension of value: transactionA transaction must be evaluated according to the balance of cost and benefits in a mental account. ExampleJacket for $125 Calculator for $15Calculator on sale at other store for $10(20 minutes drive away)Would you make a trip to the ot

23、her store?Answer: Yes ExampleJacket for $15 Calculator for $125Calculator on sale at other store for $120(20 minutes drive away)Would you make a trip to the other store?Answer: No In fact, they the same:One has to decide whether to drive 20 minutes to save $5The first example: people compare the $5 with the price of calculator ($15), which is more impressive than a reduction from $125 to $120Framing effect may be particularly pronounced in situations that have a singe dimension of cost (money) and several dimension of