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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.

Suggested Citation

  • 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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    Cited by:

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    3. Iñigo Iturbe-Ormaetxe & Giovanni Ponti & Josefa Tomás, 2016. "Myopic Loss Aversion under Ambiguity and Gender Effects," PLOS ONE, Public Library of Science, vol. 11(12), pages 1-11, December.
    4. Njo Anastasia & Theresia Chrestella, 2021. "The Effect of Geographical Diversification Towards Property Investment Decisions in Indonesia," International Journal of Finance, Insurance and Risk Management, International Journal of Finance, Insurance and Risk Management, vol. 11(1), pages 78-95.
    5. 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.
    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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