We develop a theoretical model in which investors evaluate dual-listed stocks through the prospect theory value of their historical return distributions. When the prospect theory value (PTV) of A shares exceeds that of H-shares, the A-share price will be higher than the H-share price, generating a persistent equilibrium price premium despite identical fundamentals. Using Chinese A–H dual-listed firms, we find that the PTV difference positively explains the AH premium. A gain–loss decomposition shows that A-shares have higher PTV because their less negative loss contribution more than offsets their smaller gain contribution. Consistent with this result, loss aversion and value-function curvature exhibit stronger pricing relationships than probability weighting. Investor composition shapes the pricing influence of PTV. Our results also explain why the AH premium increased following deeper market integration, like the Shanghai–Hong Kong Stock Connect.