Behavioral portfolio theory

Wirasmi Wardhani

Abstract


Mean-Variance Portfolio Theory (MVT) by Markowitz (1952) is a theory that most investor used when they are creating portfolio despite the unanswered issues that theory still can’t answer. One of which is how the investor can create a portfolio if the investor have many actions regarding the risks. The unsolved matters in MVT frame can be answered/solved through Behavioral Portfolio Theory (BPT). BPT explains how investor can create an optimal portfolio if the investor have many actions towards the risks. BPT also explains the investor is not always risk averse (the attitude that is always assumed in MVT). BPT furthermore explains the investor did not take their whole porftolio into consideration, in the contrary, the investor consider their portfolio as a collection from mental accounting (MA) subportfolio whereas each subportfolio is connected to a purpose dan every purpose has a threshold level.

Keyword: Mean-variance portfolio theory, behavioral portfolio theory, mental accounting, behavioral finance


Full Text:

PDF

References


Das, S., Markowitz, H., Scheid, J & Statman, M. 2010. Portfolio Optimization with Mental Accounts. Journal of Financial and Quantitative Analysis, Vol. 45, No. 2, Apr. 2010 : 1-24.

Das, S., Markowitz, H., Scheid, J & Statman, M. 2011. Portfolios for Investors Who Want to Reach their Goals While Staying on the Mean-Variance Efficient Frontier. Journal of Wealth Management, Vol. 14, No. 2 (Fall 2011) : 25-31.

Hoffmann, A, O, I., Shefrin, H, M., & Pennings, J, M, E. 2010. Behavioral portfolio analysis of individual investor. SSRN Working Paper Series.

Muner, S., & Rehman, S. 2012. Materialization of Behavioral Finance and Behavioral Portfolio Theory: A Brief Review. Journal of Economics and Behavioral Studies: 431-435.

Pfiffelmann, M., Roger, T., & Bourachnikova, O. 2013. When behavioral portfolio theory meets Markowitz theory. Working Paper.

Shefrin, H & Statman, M. 2000. Behavioral Portfolio Theory. Journal of Financial and Quantitative Analysis, Vol. 35, No. 2, June 2000 : 127 – 151.

Statman, M. 2002. How much diversification is enough?. Working Paper.

Statman, M. 2002. Lottery Players / Stock Traders. Financial Analysts Journal: 14-21.




DOI: http://dx.doi.org/10.1505/jfor.v18i2.868

DOI (PDF): http://dx.doi.org/10.1505/jfor.v18i2.868.g91

Refbacks

  • There are currently no refbacks.




Copyright (c) 2017 FORUM EKONOMI

Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License.

ISSN print: 1411-1713

ISSN online: 2528-150X

 

 

Creative Commons License
FORUM EKONOMI: Jurnal Ekonomi, Manajemen, dan Akuntansi is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.