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Explain clearly.. Q5 (10 marks). Suppose that we are interested in explaining the equity premium puzzle using prospect theory. Suppose also that the probability weighting

Explain clearly..

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Q5 (10 marks). Suppose that we are interested in explaining the equity premium puzzle using prospect theory. Suppose also that the probability weighting function is linear and the utility function under prospect theory is given by 20.88 if x 2 0 (domain of gains) v (x) = - (-2)0.88 if x

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