Anchoring or Loss Aversion? Empirical Evidence from Art Auctions

39 Pages Posted: 25 Sep 2014

See all articles by Kathryn Graddy

Kathryn Graddy

Brandeis University - Department of Economics

Lara Loewenstein

Federal Reserve Bank of Boston

Jianping Mei

New York University (NYU) - Department of Finance

Michael Moses

ART MARKET CONSULTANCY

Rachel A.J. Pownall

Tilburg University - Department of Finance; Maastricht University - Department of Finance

Date Written: June 2014

Abstract

We find evidence for the behavioral biases of anchoring and loss aversion. We find that anchoring is more important for items that are resold quickly, and we find that the effect of loss aversion increases with the time that a painting is held. The evidence in favor of anchoring and loss aversion with this large dataset validates previous results and adds to the empirical evidence a finding of increasing loss aversion with the length a painting is held. We do not find evidence that investors can take advantage of these behavioral biases.

Keywords: anchoring, art auctions, endowment effect, loss aversion

JEL Classification: D03, D44, Z11

Suggested Citation

Graddy, Kathryn and Loewenstein, Lara and Mei, Jianping and Moses, Michael and Pownall, Rachel Ann Jane, Anchoring or Loss Aversion? Empirical Evidence from Art Auctions (June 2014). CEPR Discussion Paper No. DP10048. Available at SSRN: https://ssrn.com/abstract=2501520

Kathryn Graddy (Contact Author)

Brandeis University - Department of Economics ( email )

415 South Street MS 021
Waltham, MA 02453-2728
United States
781-736-8616 (Phone)
781-736-2269 (Fax)

HOME PAGE: http://people.brandeis.edu/~kgraddy/

Lara Loewenstein

Federal Reserve Bank of Boston ( email )

600 Atlantic Avenue
Boston, MA 02210
United States

Jianping Mei

New York University (NYU) - Department of Finance ( email )

Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States
212-998-0354 (Phone)
212-995-4221 (Fax)

Michael Moses

ART MARKET CONSULTANCY ( email )

20 WEST 64TH STREET
APT 26K
NEW YORK, NY 10023
United States

HOME PAGE: http://www.stern.nyu.edu/om/faculty/moses/

Rachel Ann Jane Pownall

Tilburg University - Department of Finance ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Maastricht University - Department of Finance ( email )

Maastricht, 6200 MD
Netherlands

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