MENTAL FRAMING IN RISK-AVERSION DYNAMICS AN EMPIRICAL INVESTIGATION OF INTERTEMPORAL CHOICE

摘要

This paper provides an empirical investigation of the mental framing based explanation for heteroscedasticity by Ormos and Timotity. We find empirical support for their model from two different point of view: first, the analysis of a huge individual trading dataset shows that investors indeed become risk-seeking right after losses and more risk-averse subsequent to gains; second, the parameter estimation of our volatility model yields the predicted negative relationship between abnormal returns and subsequent volatility.