TikZ and PGFPlots for Discussions.
List of figures:
Prospect Theory
Discussion of Prospect Theory and Stock Markets Anomalies (Barberis, Jin, and Wang)
\begin{tikzpicture}
\begin{groupplot}[
group style={group size=2 by 1, horizontal sep=2cm}, no markers,
height=5cm, width=7cm,
axis x line=bottom, axis y line=left
]
% PLOT 1
\nextgroupplot[
xlabel = Payoff,
ylabel = $v(x)$,
xmin=-2, xmax=2,
ymin=-4, ymax=3,
extra x tick style={major tick length=0mm, grid=none},
xtick={-2, 0, 2},
xticklabels={-2, 0, 2},
ytick={-4, 0, 3}
]
\addplot[red, thick, domain=-2:2, samples=200, variable=\t](
{t },
{ ((t+abs(t))/2)^(0.5) - 2.5 * ((abs(t)-t)/2)^0.5 }
);
\draw[dotted, color=black] (axis cs:-2,0) -- (axis cs:2,0);
\draw[dotted, color=black] (axis cs:0,-4) -- (axis cs:0,3);
% PLOT 2
\nextgroupplot[
xlabel = P,
ylabel = $w(P)$,
xmin=0, xmax=1,
ymin=0, ymax=1,
xtick={0, 0.5, 1},
ytick={0, 0.5, 1}
]
\addplot[color=black, dotted, domain=0:1, samples=100, variable=\t ](
{t },
{t^1 / (t^1 + (1-t)^1)^(1/1) }
);
\addplot[color=black, dashed, domain=0:1, samples=100, variable=\t](
{t },
{t^0.65 / (t^0.65 + (1-t)^0.65)^(1/0.65) }
);
\addplot[color=black, solid, domain=0:1, samples=100, variable=\t](
{t },
{t^0.4 / (t^0.4 + (1-t)^0.4)^(1/0.4) }
);
\end{groupplot}
\end{tikzpicture}