The glossary Prospect theory
The prospect theory was developed by two Nobel Prize economists Daniel Kahneman and Amos Tversky in the late 70s. A key theory in the field of research called Behavioral finance, it seeks to explain how individuals make decisions when faced with uncertainty. One of its main contributions is to acknowledge that the psychology of investors plays an important role in financial markets.
The story of Daniel Kahneman and Amos Tversky was the main theme of Michael Lewis popular book: “THE UNDOING PROJECT A Friendship That Changed Our Minds”.