Mental Accounts with Horizon and Asymmetry Preferences

44 Pages Posted: 7 Jan 2017 Last revised: 1 Oct 2019

Date Written: January 4, 2017


The paper extends the mental accounting framework in behavioral finance with investors' time horizon and with asymmetric consideration between extreme gains and losses. This generalized Horizon-Asymmetry Mental Accounting framework (HAMA) has important implications for the determination of investors' risk preferences. Risk aversion and the bond-to-stock ratio are found to decline with investment horizon. Investors who assign a high value to upside potential tend to select portfolios with more important asymmetric and leptokurtic distributions. In its general version, the model does not rely on any specific utility function nor any functional shape for the return distribution. The model is shown to be flexible enough to encompass optimal allocations from the mean-variance portfolio theory, the expected power utility criterion, and a non-Gaussian utility framework.

Keywords: mental accounts, portfolio choice, horizon, upside potential, risk aversion

JEL Classification: G0, G11, C14

Suggested Citation

Hübner, Georges and Lejeune, Thomas, Mental Accounts with Horizon and Asymmetry Preferences (January 4, 2017). Proceedings of Paris December 2019 Finance Meeting EUROFIDAI - ESSEC, Available at SSRN: or

Georges Hübner

HEC Liège ( email )

Rue Louvrex 14, Bldg. N1
Liege, 4000
+32 42327428 (Phone)

Thomas Lejeune (Contact Author)

National Bank of Belgium ( email )

Brussels, B-1000

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