Causes, Consequences, and Cures of Myopic Loss Aversion - An Experimental Investigation

Universitat Innsbruck Working Paper No. 2008-01

35 Pages Posted: 15 Jan 2008 Last revised: 18 Jan 2008

See all articles by Gerlinde Fellner-Röhling

Gerlinde Fellner-Röhling

University of Ulm - Department of Mathematics and Economics

Matthias Sutter

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Research on Collective Goods; University of Cologne - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: January 11, 2008

Abstract

We examine in an experiment the causes, consequences and possible cures of myopic loss aversion (MLA) for investment behaviour under risk. We find that both, investment horizons and feedback frequency contribute almost equally to the effects of MLA. Longer investment horizons and less frequent feedback lead to higher investments. However, when given the choice, subjects prefer on average shorter investment horizons and more frequent feedback. Exploiting the status quo bias by setting a long investment horizon or low feedback frequency as a default turns out to be a successful behavioural intervention that increases investment levels.

Keywords: myopic loss aversion, risk, investment, experiment

JEL Classification: C91, D80, G11

Suggested Citation

Fellner-Röhling, Gerlinde and Sutter, Matthias, Causes, Consequences, and Cures of Myopic Loss Aversion - An Experimental Investigation (January 11, 2008). Universitat Innsbruck Working Paper No. 2008-01. Available at SSRN: https://ssrn.com/abstract=1083998 or http://dx.doi.org/10.2139/ssrn.1083998

Gerlinde Fellner-Röhling

University of Ulm - Department of Mathematics and Economics ( email )

Helmholzstrasse
Ulm, D-89081
Germany

Matthias Sutter (Contact Author)

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Research on Collective Goods ( email )

Kurt-Schumacher-Str. 10
D-53113 Bonn, 53113
Germany

University of Cologne - Department of Economics

Cologne, 50923
Germany

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