Asymmetric preferences in investment decisions in the Brazilian financial market

• Autor(a) principal: Martits, Luiz Augusto
• Data de Publicação: 2007
• Outros Autores: Eid Júnior, William
• Tipo de documento: Artigo
• Idioma: eng
• Título da fonte: Repositório Institucional do FGV (FGV Repositório Digital)
• Texto Completo: http://hdl.handle.net/10438/15563
• topic: Utility maximization; Loss aversion; Risk aversion; Brazilian stock market; Prospect; Finanças; Mercado financeiro - Brasil

The main objective of this article is to test the hypothesis that utility preferences that incorporate asymmetric reactions between gains and losses generate better results than the classic Von Neumann-Morgenstern utility functions in the Brazilian market. The asymmetric behavior can be computed through the introduction of a disappointment (or loss) aversion coefficient in the classical expected utility function, which increases the impact of losses against gains. The results generated by both traditional and loss aversion utility functions are compared with real data from the Brazilian market regarding stock market participation in the investment portfolio of pension funds and individual investors.