Optimization And Research Of Asset Investment Strategy Considering Transaction Cost Under Cumulative Prospect Theory

The issue of optimal investment strategy has been the core content of various investment activities in the financial market and also is the focus that domestic and foreign scholars are studying currently.It is universally acknowledged that the key hypothesis of the optimal investment strategy like expected utility theory is that the investors are rational.However,through the observation of decision of the investors in the financial market,the optimal investment strategy is difficult to offer a reasonable explanation to the anomalies.Moreover,the domestic stock market is composed of abundant medium and small investors,the irrational factors are usually dominant.Consequently,the classic hypothesis of "rational person" is out of the reality and fact.This paper takes the psychological factors into consideration and combines the knowledge of behavioral finance to have a deep and comprehensive study about the behavior of investors under Cumulative Prospect Theory.This paper uses the studying method of combination of theory and evidence,and the structure as following: the first part is the study background,meaning,and the domestic and foreign literature overview.The second part is the detailed introduction of theoretical structure of Cumulative Prospect Theory.Then,we carry on empirical analysis by selecting stock of the A-share market with different yield rate and volatility,in order to test the sensitivity of the optimal investment strategy to risk attitude coefficient--,and compare the similarities and differences between the optimal investment strategy with or without the transaction cost.Based on result of the empirical analysis,it is clear to see the investors attitudes towards the risks and the influence that the transaction cost has on the optimal investment.This paper arrives at a conclusion that the empirical test of model corresponds to the reality.The final section is about the summary and expectation.This paper also provides a brand-new angle for the issue of portfolio investment models and is of guidance for the investment behavior of the medium and small stock investors in the domestic stock market.