Which of the following is NOT a drawback of prospect theory?

The assertion that the failure to predict market trends is not a drawback of prospect theory is accurate because prospect theory primarily focuses on how investors perceive gains and losses, particularly emphasizing behavioral biases and the psychological impact of decision-making under risk. The theory proposes that individuals value gains and losses differently, leading to decisions that deviate from traditional economic theory, which assumes rationality.

Prospect theory does not specifically concern itself with market trends; instead, it seeks to explain individual behavioral aspects, such as loss aversion and the perception of risks. This means that it is more about understanding the psychological factors that influence investor behavior rather than predicting the overarching movements of entire markets. As a result, the inability to predict market trends does not detract from the theory’s core insights about individual decision-making processes under uncertainty. Thus, it's more accurate to say that prospect theory has its strengths in behavioral insights, while market trend predictions may rely on other analytical frameworks or theories.