Please use this identifier to cite or link to this item: https://doi.org/10.1016/j.jebo.2008.03.013
Title: Stochastic dominance and behavior towards risk: The market for Internet stocks
Authors: Fong, W.M. 
Lean, H.H.
Wong, W.K.
Keywords: Gambles
Prospect theory
Stochastic dominance
Utility functions
Issue Date: 2008
Citation: Fong, W.M., Lean, H.H., Wong, W.K. (2008). Stochastic dominance and behavior towards risk: The market for Internet stocks. Journal of Economic Behavior and Organization 68 (1) : 194-208. ScholarBank@NUS Repository. https://doi.org/10.1016/j.jebo.2008.03.013
Abstract: Internet stocks registered large gains in the late 1990s, followed by large losses from early 2000. Using stochastic dominance theory, we infer how investor risk preferences have changed over this cycle, and relate our findings to utility theory and behavioral finance. Our major findings are as follows. First, risk averters and risk seekers show a distinct difference in preference for Internet versus "old economy" stocks. This difference is most evident during the bull market period (1998-2000) where Internet stocks stochastically dominate old economy stocks for risk seekers but not risk averters. In the bear market, risk averters show an increased preference for old economy stocks, while risk seekers show a reduced preference for Internet stocks. These results are inconsistent with prospect theory and indicate that investors exhibit reverse S-shaped utility functions. © 2008 Elsevier B.V. All rights reserved.
Source Title: Journal of Economic Behavior and Organization
URI: http://scholarbank.nus.edu.sg/handle/10635/44431
ISSN: 01672681
DOI: 10.1016/j.jebo.2008.03.013
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