Evaluation with dynamic reference: Sustainable investment

Arbeitspapier

The Prospect Theory proposes to assess outcomes relative to a reference point (or benchmark). Although the literature recognises the relevance of dynamic benchmarks, most of the applications of Prospect Theory employ static reference points (or a status quo). This paper aims to develop a Prospect Theory framework for investment under uncertainty subject to a dynamic reference point, within the context of environmental policy making, where the distinction between a dynamic and a static frameworks is crucial. I evince that, in contrast to the static framework, in a dynamic framework the investor measures not only the absolute but also the relative risk premium (Sharpe ratio) of the investment opportunity, incorporating the risks and returns of a reference portfolio. I propose that there exists a relation between static and dynamic frameworks. Using the dynamic framework, I argue that in the environmental context international co-operation is the key to a successful environmental policy.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Working Paper ; No. 651

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Value Theory ; General Financial Markets: Government Policy and Regulation ; Environmental Economics: Government Policy
• Thema: prospect theory ; dynamic reference ; sustainable development ; Prospect Theory ; Werttheorie ; Nachhaltige Entwicklung ; Internationale Umweltpolitik ; Dynamisches Modell ; Theorie

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Vinokur, Leon
• Ereignis: Veröffentlichung
• (wer): Queen Mary University of London, Department of Economics
• (wo): London
• (wann): 2009

Weitere Informationen

• Handle: http://hdl.handle.net/10419/55191
• Letzte Aktualisierung: 10.03.2025, 11:44 MEZ