Research

Working paper

Abstract: In this work, we suggest absolute and relative measures for the psychological features called attractiveness and discriminability. In 1999, Richard Gonzalez and George Wu defined these psychological factors in a relative sense and in the context of probability weighting functions. Based on their ideas, we propose local and global measures for these psychological concepts. We compare our measures to some particular cases found in the literature. We also apply our measures in the most common two-parametric weighting functions used in experimental and empirical works. In addition, we perform a sensitivity analysis to identify which parameter can be chosen as an index for attractiveness and discriminability. Our results show that, in most of the cases, both parameters influence these measures. There is a problem in choosing only one parameter to represent attractiveness or discriminability. By doing so, we are missing the information given by the other parameter.

Publications

Journal of Mathematical Psychology, 109, 2022. https://doi.org/10.1016/j.jmp.2022.102669.

Abstract:  In 1999, Richard Gonzalez and George Wu proposed an axiomatization for the widely used Goldstein–Einhorn probability weighting functions. Our present study analyzes the preference conditions in the axioms, leading to the discovery of a larger family of weighting functions. Furthermore, we present a new preference condition which is necessary and sufficient for the Goldstein–Einhorn weighting functions.

The Quarterly Review of Economics and Finance, 80, p. 90-101, 2021.  https://doi.org/10.1016/j.qref.2021.01.016.

Abstract: Using prospect theory, we analyzed the narrow framing bias in investment decisions in certain emerging countries: Brazil, China, Russia, Mexico, and South Africa. In all cases, we empirically identified the predictive power of prospect theory for stock returns. We also found that the probability weighting function is the most important factor in this predictive power. The relationship between prospect theory and stock returns is different in each country and may be influenced by factors associated with cultural aspects.

Working projects