This paper examines the implications of Tversky and Kahneman's cumulative prospect theory for asset pricing, focusing on the probability weighting component. The main finding is that, in contrast to the standard expected utility model, a security's own skewness can be priced: a positively skewed security can be "overpriced" and can earn a negative average excess return. This result is derived from a novel equilibrium with non-unique global optima, where investors with cumulative prospect theory preferences can hold different portfolios despite having homogeneous preferences. The authors demonstrate this using a model with a small, independent, positively skewed security, showing that such a security can become overpriced and earn a negative average excess return. This effect is robust even if there are multiple skewed securities in the economy. The paper also discusses several empirical implications, including the low average returns on IPOs, private equity, and distressed stocks, the diversification discount, and the under-diversification in household portfolios. The results suggest a unifying framework for understanding various financial phenomena.This paper examines the implications of Tversky and Kahneman's cumulative prospect theory for asset pricing, focusing on the probability weighting component. The main finding is that, in contrast to the standard expected utility model, a security's own skewness can be priced: a positively skewed security can be "overpriced" and can earn a negative average excess return. This result is derived from a novel equilibrium with non-unique global optima, where investors with cumulative prospect theory preferences can hold different portfolios despite having homogeneous preferences. The authors demonstrate this using a model with a small, independent, positively skewed security, showing that such a security can become overpriced and earn a negative average excess return. This effect is robust even if there are multiple skewed securities in the economy. The paper also discusses several empirical implications, including the low average returns on IPOs, private equity, and distressed stocks, the diversification discount, and the under-diversification in household portfolios. The results suggest a unifying framework for understanding various financial phenomena.