Does the modified prospect theory consist with CAPM?
- 经济学院－会议论文 
In this paper, we propose a new stochastic dominance criterion. We call it the modified prospect stochastic dominance (MPSD). As we show in this paper, MPSD is based on the framework of modified prospect theory. In order to analyze the MPSD clearer, we derive the equivalent expression of MPSD rule in the form of return distribution and give a detailed proof. At last, we analyze whether the modified prospect theory is consistent with capital asset pricing model (CAPM). We get the conclusions as follows: Based on the normally distributed returns, if the equilibrium of the financial market exists, the security market line theorem and CAPM holds. ? 2014 WIT Press.