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Myopic loss aversion: Potential causes of replication failures

  • Alexander Klos
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    This paper presents two studies on narrow bracketing and myopic loss aversion. The first study shows that the tendency to segregate multiple gambles is eliminated if subjects face a certainty equivalent or a probability equivalent task instead of a binary choice. The second study argues that the behavioral differences previously attributed entirely to myopic loss aversion are partly because long-term return properties are simply easier to grasp if the return information is already provided in the form of long-term returns rather than one-year returns. Both results may be related to recent failures to replicate myopic loss aversion. When the choice situation is structured in such a way that it draws respondents' attention to the final outcome distribution and/or if severe misestimations of long-term returns based on short-term return information are unlikely, behavioral differences consistent with myopic loss aversion are less likely to be observed.

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    Article provided by Society for Judgment and Decision Making in its journal Judgment and Decision Making.

    Volume (Year): 8 (2013)
    Issue (Month): 5 (September)
    Pages: 617-629

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    Handle: RePEc:jdm:journl:v:8:y:2013:i:5:p:617-629
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