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Previous outcomes and reference dependence: A meta study of repeated investment tasks with and without restricted feedback

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  • Hopfensitz, Astrid

Abstract

When investment is repeated, previous outcomes (winning/losing) as well as the current budget level (gain/loss domain) influence decisions. The first is related to the so-called "gamblers fallacy". The second to value function relative to some reference point. Both effects have been extensively studied, however not their interaction. We present a meta-study of five experiments initially conducted to investigate myopic-loss-aversion. We observe that investment is related to the number of previous winning rounds as well as to the current budget position relative to a reference point. These effects persist when the analysis is extended to settings with restricted flexibility concerning investment.

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  • Hopfensitz, Astrid, 2009. "Previous outcomes and reference dependence: A meta study of repeated investment tasks with and without restricted feedback," MPRA Paper 16096, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:16096
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    3. Herwan Darwis & Suwito Suwito & Zainuddin Jhay, 2021. "Testing of behavior bias: Gamblers fallacy, halo effect and familiarity effect on investors," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 10(8), pages 275-283, December.
    4. Hopfensitz, Astrid & Wranik, Tanja, 2009. "How to Adapt to Changing Markets: Experience and Personality in a Repeated Investment Game," TSE Working Papers 09-122, Toulouse School of Economics (TSE).
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    6. Tom Lane, 2015. "Discrimination in the laboratory: a meta-analysis," Discussion Papers 2015-03, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
    7. Lane, Tom, 2016. "Discrimination in the laboratory: A meta-analysis of economics experiments," European Economic Review, Elsevier, vol. 90(C), pages 375-402.

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    More about this item

    Keywords

    reference point; gamblers fallacy; meta study; experiment; risk taking; myopic loss aversion;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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