Prospect theory - work from evidence backwards to est this

Prospect theory is a psychological theory that explains how people make decisions when faced with risks and uncertainties. It proposes that people do not always make decisions based on logic and rationality, but instead on psychological factors like emotions, values, and preferences. Prospect theory is based on the idea that people are risk-averse when evaluating potential gains and risk-seeking when evaluating potential losses. It is a way of understanding how people make decisions in situations of uncertain outcomes and potential gains or losses. The basic premise of prospect theory is to work from evidence backwards in order to estimate how people may behave in different scenarios. This involves looking at past behaviour and trends and using this to predict future decisions. For example, behavioural science can be applied to financial decision making in order to learn about the psychology behind individual stock trades. By gathering data on previous decisions and the outcomes, it can be possible to make better predictions about what might happen in the future. Additionally, by understanding the psychology behind decision making, it may be possible to build more appropriate models for managing investments.