Loss Aversion Under Cognitive Load

Journal of Personal Finance. Forthcoming.

26 Pages Posted: 22 Nov 2013 Last revised: 23 Jul 2014

See all articles by Michael Guillemette

Michael Guillemette

Texas Tech University - Department of Personal Financial Planning

Russell N. James

Texas Tech University

Jeff T. Larsen

Texas Tech University

Date Written: July 16, 2014

Abstract

An experiment was conducted to explore whether loss aversion is altered when individuals are placed under a higher level of cognitive load. The coefficients of monetary loss aversion were measured for 30 participants under low and high cognitive load. Memorizations of differing spans of digits were used to manipulate cognitive load. Participants’ skin conductance was measured to quantify emotional responses to gains and losses. No statistically significant evidence was found that loss aversion, as measured by choice, is altered when individuals are placed under a higher level of cognitive load. Statistically significant evidence was found that a higher level of cognitive load temporarily reduces an individual’s emotional arousal to absolute and relative small dollar losses.

Keywords: loss aversion, cognitive load, skin conductance response

JEL Classification: D10, D81

Suggested Citation

Guillemette, Michael and James, Russell N. and Larsen, Jeff T., Loss Aversion Under Cognitive Load (July 16, 2014). Journal of Personal Finance. Forthcoming., Available at SSRN: https://ssrn.com/abstract=2357609 or http://dx.doi.org/10.2139/ssrn.2357609

Michael Guillemette (Contact Author)

Texas Tech University - Department of Personal Financial Planning ( email )

1301 Akron Ave, HS-260
Box 41210
Lubbock, TX 79409-1210
United States

Russell N. James

Texas Tech University ( email )

2500 Broadway
Lubbock, TX 79409
United States

Jeff T. Larsen

Texas Tech University ( email )

2500 Broadway
Lubbock, TX 79409
United States

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