Title: Investor Sentiment and the Prospect Theory Effect

Speaker: Han Jing, Postdoctoral Researcher, School of Economics, Shandong University. Research fields: behavioral finance and empirical asset pricing; reviewer for Pacific-Basin Finance Journal, Managerial Finance, etc.

Abstract: Under prospect theory (probability weighting, loss aversion, value curvature), the value function is negatively related to expected returns. We find that probability weighting and loss aversion affect stock returns differently across sentiment regimes: probability weighting predicts returns after high-sentiment periods, while loss aversion predicts returns after low-sentiment periods. Sentiment-related mispricing partially explains these prospect-theory effects.

Date & time: 5 December 2024, 12:15–13:15

Venue: Room B321, Zhixin Building, Central Campus, Shandong University