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Does Binding or Feeback Influence Myopic Loss Aversion - An Experimental Analysis

  • Langer, Thomas

    ()

    (Westfälischen Wilhelms-Universität Münster Lehrstuhl für BWL, insbesondere Finanzierung)

  • Weber, Martin

    ()

    (Lehrstuhl für ABWL, Finanzwirtschaft, insb. Bankbetriebslehre)

Empirical research has shown that a lower feedback frequency combined with a longer bind-ing period decreases myopia and thereby increases the willingness to invest into a risky asset. In an experimental study, we disentangle the intertwined manipulation of feedback frequency and binding period to analyze how both variables alone contribute to the change in myopia and how they interact. We find a strong effect for the length of commitment, a much less pro-nounced effect for the feedback frequency, and a strong interaction between both variables. The results have important implications for real world intertemporal decision making.

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Paper provided by Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim in its series Sonderforschungsbereich 504 Publications with number 03-20.

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Length: 19 pages
Date of creation: 09 Oct 2003
Date of revision:
Handle: RePEc:xrs:sfbmaa:03-20
Note: Financial support from the Deutsche Forschungsgemeinschaft, SFB 504, at the University of Mannheim, is gratefully acknowledged.
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  1. 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.
  2. Gneezy, U. & Kapteyn, A. & Potters, J.J.M., 2002. "Evaluation Periods and Asset Prices in a Market Experiment," Discussion Paper 2002-8, Tilburg University, Center for Economic Research.
  3. John List & Michael Haigh, 2005. "Do professional traders exhibit myopic loss aversion? An experimental analysis," Artefactual Field Experiments 00052, The Field Experiments Website.
  4. Daniel Kahneman & Dan Lovallo, 1993. "Timid Choices and Bold Forecasts: A Cognitive Perspective on Risk Taking," Management Science, INFORMS, vol. 39(1), pages 17-31, January.
  5. Camerer, Colin & Loewenstein, George & Weber, Martin, 1989. "The Curse of Knowledge in Economic Settings: An Experimental Analysis," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1232-54, October.
  6. Gneezy, U. & Potters, J.J.M., 1997. "An experiment on risk taking and evaluation periods," Other publications TiSEM da6ba1bf-e15c-41b2-ae95-c, Tilburg University, School of Economics and Management.
  7. Langer, Thomas & Weber, Martin, 2005. "Myopic prospect theory vs. myopic loss aversion: how general is the phenomenon?," Journal of Economic Behavior & Organization, Elsevier, vol. 56(1), pages 25-38, January.
  8. 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.
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