The document discusses behavioral finance at JP Morgan. It provides an overview of behavioral finance concepts like overconfidence, loss aversion, and prospect theory. It then discusses how JP Morgan implements behavioral finance principles in its funds and products, focusing on overconfidence and loss aversion. Specific funds mentioned include the Intrepid Funds, which aim to capitalize on emotions that cause poor investment decisions.
13. Prospect Theory In year 1979 Daniel Kahneman & Amos Tversky published there article about Prospect Theory as a psychologically realistic alternative to Expected Utility Theory. There is a discontinuity in slope which means we value losses more than we value gains given an equal probability for both. In contrary to EUF, here we are always at the reference point exaggerate in our minds the importance of deviations from where we are. This is not rational! So losses tend to dominate so you don’t want to take the bet. Expected Utility Function Value Function
![Behavioral Finance at JP Morgan ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]](https://image.slidesharecdn.com/h-elgarhydefensepresentation-100529103742-phpapp01/85/Behavioral-Finance-1-320.jpg)
![Agenda ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Slide 1 © Hussein Elgarhy and Fouad Ellaithy, MsM-RITI-Cairo Outreach Program, 2010.](data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7)