Advanced Search
MyIDEAS: Login to save this article or follow this journal

Causes, Consequences, and Cures of Myopic Loss Aversion - An Experimental Investigation

Contents:

Author Info

  • Gerlinde Fellner
  • Matthias Sutter

Abstract

We use an experiment to examine the causes, consequences and possible cures of myopic loss aversion (MLA) for investment behaviour under risk. We find that both investment horizons and feedback frequency contribute almost equally to the effects of MLA. Longer investment horizons and less frequent feedback lead to higher investments. However, when given the choice, subjects prefer on average shorter investment horizons and more frequent feedback. Exploiting the "status quo" bias by setting a long investment horizon or low feedback frequency as a default turns out to be a successful behavioural intervention to increase investment levels. Copyright � The Author(s). Journal compilation � Royal Economic Society 2009.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1468-0297.2009.02251.x
File Function: link to full text
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 119 (2009)
Issue (Month): 537 (04)
Pages: 900-916

as in new window
Handle: RePEc:ecj:econjl:v:119:y:2009:i:537:p:900-916

Contact details of provider:
Postal: Office of the Secretary-General, School of Economics and Finance, University of St. Andrews, St. Andrews, Fife, KY16 9AL, UK
Phone: +44 1334 462479
Email:
Web page: http://www.res.org.uk/
More information through EDIRC

Order Information:
Web: http://www.blackwellpublishers.co.uk/asp/journal.asp?ref=0013-0133

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Dieter Gstach, 1998. "Technical Efficiency in Noisy Multi-Output Settings," Department of Economics Working Papers wuwp059, Vienna University of Economics, Department of Economics.
  2. Martin Zagler, 1996. "Long-Run Monetary Non-Neutrality in a Model of Endogenous Growth," Department of Economics Working Papers wuwp037, Vienna University of Economics, Department of Economics.
  3. Pasquale Commedatore & Ingrid Kubin, 2003. "The dynamics of wages and employment in a model of monopolistic competition and efficient bargaining," Department of Economics Working Papers wuwp085, Vienna University of Economics, Department of Economics.
  4. Kocher, Martin G. & Luptacik, Mikulas & Sutter, Matthias, 2006. "Measuring productivity of research in economics: A cross-country study using DEA," Socio-Economic Planning Sciences, Elsevier, vol. 40(4), pages 314-332, December.
  5. Gerhard Munduch & Alexander Pfister & Leopold Sögner & Alfred Stiassny, 2002. "Estimating Marginal Costs for the Austrian Railway System," Department of Economics Working Papers wuwp078, Vienna University of Economics, Department of Economics.
  6. Thomas Grandner, 1997. "Territoriale Evolution von Kooperation in einem Gefangenendilemma," Department of Economics Working Papers wuwp045, Vienna University of Economics, Department of Economics.
  7. Christian Bellak, 1999. "Explaining Foreign Ownership By Comparative and Competitive Advantage: Empirical Evidence," Department of Economics Working Papers wuwp062, Vienna University of Economics, Department of Economics.
  8. Thomas Grandner, 2007. "Product differentiation in a linear city and wage bargaining," Department of Economics Working Papers wuwp109, Vienna University of Economics, Department of Economics.
  9. Engelbert Stockhammer, 1999. "Robinsonian and Kaleckian Growth. An Update on Post-Keynesian Growth Theories," Department of Economics Working Papers wuwp067, Vienna University of Economics, Department of Economics.
  10. Sutter, Matthias, 2007. "Are teams prone to myopic loss aversion? An experimental study on individual versus team investment behavior," Economics Letters, Elsevier, vol. 97(2), pages 128-132, November.
  11. James J. Choi & David Laibson & Brigitte C. Madrian & Andrew Metrick, 2001. "For Better or For Worse: Default Effects and 401(k) Savings Behavior," NBER Working Papers 8651, National Bureau of Economic Research, Inc.
  12. Benartzi, Shlomo & Thaler, Richard H, 1995. "Myopic Loss Aversion and the Equity Premium Puzzle," The Quarterly Journal of Economics, MIT Press, vol. 110(1), pages 73-92, February.
  13. Fabio Rumler, 1999. "Computable General Equilibrium Modeling, Numerical Simulations in a 2-Country Monetary General Equilibrium Model," Department of Economics Working Papers wuwp065, Vienna University of Economics, Department of Economics.
  14. Wilfried Altzinger, 1996. "Beschäftigungseffekte des österreichischen Osthandels," Department of Economics Working Papers wuwp034, Vienna University of Economics, Department of Economics.
  15. Uri Gneezy & Arie Kapteyn & Jan Potters, 2002. "Evaluation Periods and Assett Prices in a Market Experiment," Working Papers 02-02, RAND Corporation Publications Department.
  16. Dieter Gstach & Andrew Somers & Susanne Warning, 2003. "Output specific efficiencies: The case of UK private secondary schools," Department of Economics Working Papers wuwp084, Vienna University of Economics, Department of Economics.
  17. Dieter Gstach, 2003. "A Statistical Framework for Estimating Output-Specific Efficiencies," Department of Economics Working Papers wuwp083, Vienna University of Economics, Department of Economics.
  18. Gneezy, U. & Potters, J.J.M., 1997. "An experiment on risk taking and evaluation periods," Open Access publications from Tilburg University urn:nbn:nl:ui:12-73908, Tilburg University.
  19. James J. Choi & David Laibson & Brigitte C. Madrian & Andrew Metrick, 2003. "Optimal Defaults," American Economic Review, American Economic Association, vol. 93(2), pages 180-185, May.
  20. Bellemare, C. & Krause, M. & Kroger, S. & Zhang, C., 2004. "Myopic Loss Aversion: Information Feedback vs. Investment Flexibility," Discussion Paper 2004-32, Tilburg University, Center for Economic Research.
  21. Thomas Grandner, 1998. "Market Shares of Price Setting Firms and Trade Unions," Department of Economics Working Papers wuwp061, Vienna University of Economics, Department of Economics.
  22. Dieter Gstach, 1996. "A new approach to stochastic frontier estimation: DEA+," Department of Economics Working Papers wuwp039, Vienna University of Economics, Department of Economics.
  23. Martin Zagler, 1999. "Endogenous Growth, Efficency Wages, and Persistent Unemployment," Department of Economics Working Papers wuwp066, Vienna University of Economics, Department of Economics.
  24. Sendhil Mullainathan & Richard H. Thaler, 2000. "Behavioral Economics," NBER Working Papers 7948, National Bureau of Economic Research, Inc.
  25. Engelbert Stockhammer, 2000. "Explaining European Unemployment: Testing the NAIRU Theory and a Keynesian Approach," Department of Economics Working Papers wuwp068, Vienna University of Economics, Department of Economics.
  26. Christian Bellak, 2000. "The Investment Development Path of Austria," Department of Economics Working Papers wuwp075, Vienna University of Economics, Department of Economics.
  27. Hansjoerg Klausinger, 1999. "The Stability of Full Employment. A Reconstruction of Chapter 19-Keynesianism," Department of Economics Working Papers wuwp063, Vienna University of Economics, Department of Economics.
  28. Christian Ragacs & Thomas Steinberger & Martin Zagler, 1998. "Growth Theories and the Persistence of Output Fluctuations: The Case of Austria," Department of Economics Working Papers wuwp060, Vienna University of Economics, Department of Economics.
  29. Hansjoerg Klausinger, 1997. "Die Alternativen zur Deflationspolitik Brünings im Lichte zeitgenössischer Kritik," Department of Economics Working Papers wuwp049, Vienna University of Economics, Department of Economics.
  30. R. Mehra & E. Prescott, 2010. "The equity premium: a puzzle," Levine's Working Paper Archive 1401, David K. Levine.
  31. Leopold Soegner, 1998. "Regulation of a Complementary Imputed Good in a Competitive Environment," Department of Economics Working Papers wuwp056, Vienna University of Economics, Department of Economics.
  32. Bernhard Mahlberg & Thomas Url, . "Effects of the Single Market on the Austrian Insurance Industry," WIFO Working Papers 97, WIFO.
  33. Thomas Grandner, 1996. "Is Wage-Leadership an Instrument to Coordinate Union's Wage-Policy? The Case of Imperfect Product Markets," Department of Economics Working Papers wuwp042, Vienna University of Economics, Department of Economics.
  34. Thaler, Richard H, et al, 1997. "The Effect of Myopia and Loss Aversion on Risk Taking: An Experimental Test," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 647-61, May.
  35. Charles T. Clotfelter & Philip J. Cook, 1991. "The "Gambler's Fallacy" in Lottery Play," NBER Working Papers 3769, National Bureau of Economic Research, Inc.
  36. Tversky, Amos & Kahneman, Daniel, 1992. " Advances in Prospect Theory: Cumulative Representation of Uncertainty," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 297-323, October.
  37. Arne Heise, 2001. "Das Konzept einer nachhaltigen Finanzpolitik aus heterodoxer Sicht - ein Diskussionsbeitrag," Department of Economics Working Papers wuwp076, Vienna University of Economics, Department of Economics.
  38. Harald Katzmair, 1999. "Der Modellbegriff in den Sozialwissenschaften. Zum Programm einer kritischen Soziologik," Department of Economics Working Papers wuwp064, Vienna University of Economics, Department of Economics.
  39. Özlem Onaran, 2007. "International financial markets and fragility in the Eastern Europe: "can it happen" here?," Department of Economics Working Papers wuwp108, Vienna University of Economics, Department of Economics.
  40. Thomas Grandner, 2000. "A Note on Unionized Firms' Incentive to Integrate Vertically," Department of Economics Working Papers wuwp070, Vienna University of Economics, Department of Economics.
  41. Gert Wehinger, 1997. "Exchange Rate-Based Stabilization: Pleasant Monetary Dynamics?," Department of Economics Working Papers wuwp050, Vienna University of Economics, Department of Economics.
  42. Arne Heise, 2000. "Theorie optimaler Lohnräume. Zur Lohnpolitik in der Europäischen Währungsunion," Department of Economics Working Papers wuwp073, Vienna University of Economics, Department of Economics.
  43. Michael S. Haigh & John A. List, 2005. "Do Professional Traders Exhibit Myopic Loss Aversion? An Experimental Analysis," Journal of Finance, American Finance Association, vol. 60(1), pages 523-534, 02.
  44. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
  45. Wilfried Altzinger, 1998. "Austria's Foreign Direct Investment in Central and Eastern Europe: 'Supply Based' or 'Market Driven'?," Department of Economics Working Papers wuwp057, Vienna University of Economics, Department of Economics.
  46. Thomas Grandner, 2000. "Optimal Contracts for Vertically Connected, Unionized Duopolies," Department of Economics Working Papers wuwp071, Vienna University of Economics, Department of Economics.
  47. Pavlo Blavatsky, 2003. "Note on "Small Feedback-based Decisions and Their Limited Correspondence to Description-based Decisions"," CERGE-EI Working Papers wp218, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
  48. Amos Tversky & Daniel Kahneman, 1979. "Prospect Theory: An Analysis of Decision under Risk," Levine's Working Paper Archive 7656, David K. Levine.
  49. Langer, Thomas & Weber, Martin, 2003. "Does Binding of Feedback Influence Myopic Loss Aversion? An Experimental Analysis," CEPR Discussion Papers 4084, C.E.P.R. Discussion Papers.
  50. Richard Thaler, 1985. "Mental Accounting and Consumer Choice," Marketing Science, INFORMS, vol. 4(3), pages 199-214.
  51. Arne Heise, 2000. "Postkeynesianische Beschäftigungstheorie. Einige Prinzipielle Überlegungen," Department of Economics Working Papers wuwp072, Vienna University of Economics, Department of Economics.
  52. Christian Ragacs & Martin Zagler, 1997. "Economic Policy in a Model of Endogenous Growth," Department of Economics Working Papers wuwp053, Vienna University of Economics, Department of Economics.
  53. Dieter Gstach & Thomas Grandner, 1998. "Restricted Immigration in a Two-Sector Economy," Department of Economics Working Papers wuwp055, Vienna University of Economics, Department of Economics.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ecj:econjl:v:119:y:2009:i:537:p:900-916. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.