Some properties of the optimal investment strategy in a behavioral portfolio choice model (Q2228363)

The author analyzes the monotonicity and limit properties of the optimal investment strategy in a behavioral portfolio choice model under cumulative prospect theory over risk aversion coefficient, loss aversion coefficient, and the market opportunity. The main result shows that the optimal investment strategy is nonincreasing w.r.t. the loss aversion coefficient, and strictly increasing w.r.t. the Sharpe ratio for normal distributions. This is in contrast with the case when the excess return follows an elliptical distribution.