Study On The Chatactenstics Of Investors’ Risk Attitude Based On Prospect Theory

Investors’ risk attitude is an important concept in finance, it has played a pivotalrole in the study of people’s investment decision-making behavior. The standardfinancial theory is based on the assumption of "rational man" that riskdecision-making is in strict accordance with the expected utility model and people hasalways shown a consistent attitude towards risk. However, the prospect theory wasproposed by Kahneman and Tversky in 1979, which points out that the investmentdecision-making behavior under conditions of uncertainty will be subject toindividual psychological factors and social factors, not entirely rational, and thus theface of gains and losses have different risk attitudes. Kahneman and Tversky in 1981further emphasized that the original prospect theory describes people’s static,single-game behavior, and study people’s risk attitude in a dynamic environment,you must consider how they see a series of gains and losses.A lot of scholars in-depth study of continuous investment decision-makingbehavior of investors in a dynamic environment, their studies found that investors’risk attitude is time varying, and pre-investment results will affect their attitudestoward risk, which will make investors some non-rational behavior. But from theperspective of the prior gains and losses of investor’risk attitude characteristics aremostly based on experimental psychology or personal trading account data, and thereare many disputes.Thus, starting from the overall stock market point of view, it hasimportant significance to study market overall risk attitude characteristic of investors.On the basis of the relevant theoretical research review, this paper takes thebehavior of the whole stock market as an entire entity. We use the daily return datafrom stock market of 12 representative countries or regions, and then construct theTVRA-GARCH-M model to make an empirical research on the influence of prioroutcomes to current risk attitude at the market level. And using a variety of referenceprices for the robustness test.Empirical results show that in the stock market investor’srisk attitude is time-varying, and it will be influenced by prior gains and losses. Thespecific performance is that prior gains lead to less risk aversion in the current period,investors are risk-seeking, that is to verify the house money effect; while prior lossesincrease the current risk aversion, investors are risk averse. This paper takes investorsof the stock markets as research object and market composite index data as samples to empirical research on the influence of prior outcomes to investors’risk attitude. Theresearch breaks the restrictions of personal factors and data availability, thus theresearch samples are not influenced by individual investors, and the result is alsorelatively more convincible.