The thing with prospect theory, as I recall, is that it adds a lot of complication without much extra predictive power. The classic model actually holds up pretty well when you test them against each other.
Predictive power in what sense? Take hyperbolic discounting. There's no good way to isolate discount rates anyways. Ask a sell side analyst where he gets his WACC from...
But in a very indirect sense, relative utility is a great explanation for why we don't see any kind of Beta premium. People would rather ride the highs with his neighbor than experience a better long run risk-adjusted return.
