Publication Type
Journal Article
Version
publishedVersion
Publication Date
3-1988
Abstract
This study attempted to explain Bowman's risk-return paradox in terms of recent research in behavioral decision theory and prospect theory. The research emphasized the role of reference, or target, return levels in analyzing risky choices. For returns below target, a large majority of individuals appear to be risk seeking; for returns above target, a large majority appear to be risk averse. Using extensive COMPUSTAT-based data on U.S. firms, we consistently found a negative risk-return association for firms having returns below target levels and a positive association for firms with returns above target. These results support the basic propositions of prospect theory and are extremely robust within and across industries and for all time periods studied.
Discipline
Corporate Finance | Strategic Management Policy
Research Areas
Strategy and Organisation
Publication
Academy of Management Journal
Volume
31
Issue
1
First Page
85
Last Page
106
ISSN
0001-4273
Identifier
10.2307/256499
Publisher
Academy of Management
Citation
Fiegenbaum, Avi and THOMAS, Howard.
Attitudes and the risk-return paradox: Prospect theory explanations. (1988). Academy of Management Journal. 31, (1), 85-106.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/1862
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://www.jstor.org/stable/256499