An experimental analysis of myopic loss aversion
Experiments in Financial Economics
ISBN: 978-1-78350-140-3, eISBN: 978-1-78350-141-0
Publication date: 16 January 2014
Abstract
Purpose
Previous studies showed mixed results as to the cause of myopic loss aversion (MLA). This paper reexamines the main driver of MLA, considering two factors from previous studies and an additional factor.
Design/methodology/approach
Experimentally investigate whether flexibility of investment, frequency of information feedback, or timing of decision cause MLA.
Findings
Timing of decision and flexibility of investment explain most differences in subject behavior. Frequency of information feedback makes only a marginal contribution.
Originality/value of the paper
The differences in subject behavior can be interpreted by a shift in their reference points depending on the difference in flexibility of investment, frequency of information feedback, or timing of decision.
Keywords
Acknowledgements
Acknowledgment
We are grateful to Takao Kusakawa, Yasuhiro Yonezawa, Kunio Nakashima, Shinichi Hirota, Ryoko Wada, Kenju Akai, Keiko Aoki, and anonymous referee for helpful comments and suggestions. We also appreciate valuable comments from participants at the Association of Behavioral Economics and Finance 2008 Tokyo Meeting, the Economic Science Association 2009 Tucson Meeting, the Economic Science Association 2010 Melbourne Meeting, and the Nippon Finance Association 2010 Meeting. We would like to thank Andrew Palaski for language support. We would like to acknowledge the financial support provided by the Japanese Ministry of Education, Culture, Sports, Science and Technology and NLI Research Institute, Tokyo Japan. Neither institution has any role in the study design, the collection, analysis and interpretation of data, the writing or in the decision to submit for publication of this chapter.
Citation
Kitamura, T. and Nakasato, M. (2014), "An experimental analysis of myopic loss aversion", Experiments in Financial Economics (Research in Experimental Economics, Vol. 16), Emerald Group Publishing Limited, Leeds, pp. 111-143. https://doi.org/10.1108/S0193-2306(2013)0000016006
Publisher
:Emerald Group Publishing Limited
Copyright © 2013 Emerald Group Publishing Limited