A TEST OF PROSPECT THEORY: THE CORRELATION BETWEEN UNEXPLAINED VARIANCE OF RETURN AND TARGET RETURN IN THE COMMERCIAL BANKING INDUSTRY
Hazel J. Johnson
(University of Louisville, College of Business and Public Administration, Department of Finance, Louisville, KY 40292.)
132
Abstract
This study analyzes the variability of rates of return for 11,772 U.S. commercial banks from 1979 through 1985. The objective is to determine whether variability that is not explained by exogenous variables can be explained by prospect theory. Below target, strong correlations are shown, consistent with prospect theory. When regression analysis is applied, the results are confirmed.
Citation
Johnson, H.J. (1993), "A TEST OF PROSPECT THEORY: THE CORRELATION BETWEEN UNEXPLAINED VARIANCE OF RETURN AND TARGET RETURN IN THE COMMERCIAL BANKING INDUSTRY", Studies in Economics and Finance, Vol. 14 No. 2, pp. 15-42. https://doi.org/10.1108/eb028702
Publisher
:MCB UP Ltd
Copyright © 1993, MCB UP Limited