Does Prospect Theory Explain the Disposition Effect?

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Realization Utility with Reference-Dependent Preferences (2013, unknown): “g distances were equal, gains would be realized more often. 20 Some research suggests that prospect theory may not lead to the disposition effect, e.g., Barberis and Xiong (2009), Kaustia (2010), and Hens and Vlcek (2011). In contrast with our model, none of these papers consider reinvestment. 11 Fi”
Behavioral Finance: Quo Vadis? (2015, unknown): “16See Hens and Vlcek (2005), Barberis and Xiong (forthcoming), and Shefrin (2008) 17There are at least four separate theories to explain why markets exhibit short-term momentum but long-term reversals.”
Prospect Theory and the Disposition Effect (2008, background): “An investor with private information about a stock’s value may have a propensity to realize gains and avoid realizing losses (Lakonishok and Smidt (1986)). An informed investor will buy undervalued stocks and sell as the market later incorporates the positive information in the stock price. Even if ”
Looking for Someone to Blame: Delegation, Cognitive Dissonance, and the Disposition Effect (2014, unknown): “Initial behavioral explanations focused on prospect theory (Kahneman and Tversky (1979)) and mental accounting (Thaler (1980)). Under these theories, an investor at a loss becomes risk-seeking in order to avoid the loss now, whereas the same investor at a gain becomes risk-averse in order to preserv”