Risk behaviour depends on probability and gain/loss domain

People treat probabilities objectively

Decision weights are irrelevant

People are always risk-averse

Overreliance on base rates

Correct probability judgments

 Underconfidence

Extrapolation of small samples

Concave for gains and convex for losses

Convex for gains and concave for losses

Convex for both gains and losses

Linear for gains and losses

Implies declining discount rates over time

Assumes constant discount rates

Creates time-consistent preferences

Eliminates present bias

Gains and losses relative to a reference point

Final wealth

Variance of returns

Expected utility

Prefer rational calculation

Avoid salient events

Use easily recallable events as substitutes for likelihood

Compute probabilities accurately

Their trades are always small and random

They possess superior information

Their beliefs or sentiments are not fully supported by fundamentals

They follow only technical indicators

Causing subconscious adjustment from an initial reference point

Forcing people to avoid initial values

Making initial numbers irrelevant

Eliminating framing effects

They are identical to expected utility weights

They overweight small probabilities and underweight large ones

They follow objective probabilities

They assume risk neutrality

Investor rationality

Perfectly competitive markets

Independent deviations from irrationality

Effective arbitrage