Prospect Theory and The Risk-Return Relation: Some Belgian Evidence

Abstract

In this study, Fiegenbaum and Thomas’s application of prospect theory to empirically derived risk-return relations was replicated and extended with Belgian accounting data. Four profitability variables and two risk variables figured in the analysis. Findings confirmed the results of the earlier study: firms with returns above a target level are risk-averse, and firms with returns below that target level are risk-seeking.