D.Kahneman’s S-Shaped Value Function as a Determinant of the Subjective Density Function in the US Equity Market

Student: Skatov Sergej

Supervisor: Vladimir R. Evstigneev

Faculty: Faculty of World Economy and International Affairs

Educational Programme: Bachelor

Year of Graduation: 2014

This research is devoted to behavioral finance, in particular - the controversial attitude to the risk. The purpose of the paper was to develop trade rule, which is based upon this behavioral effect. To this end, the properties of the Kahneman`s value (utility) function were obtained, according to the Jackwert's theorem density function and risk-averse function were connected, and after we get the ARA-function, we built new empirical density function and make up a trade rule by comparing it with the expected value of the asset.

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