Quantifying Loss Aversion: Evidence from a UK Population Survey

Pensions Institute Discussion Paper, PI-1912, October 2019

89 Pages Posted: 16 Mar 2020

See all articles by David P. Blake

David P. Blake

City University London - Cass Business School

E. S. Cannon

University of Bristol - Department of Economics

Douglas Wright

City University London - Sir John Cass Business School

Date Written: October 1, 2019

Abstract

We estimate loss aversion using on an online survey of a representative sample of over 4,000 UK residents. The average aversion to a loss of £500 relative to a gain of the same amount is 2.41, but loss aversion varies significantly with characteristics such as gender, age, education, financial knowledge, social class, employment status, management responsibility, income, savings and home ownership. Other influencing factors include marital status, number of children, ease of savings, rainy day fund, personality type, emotional state, newspaper and political party. However, once we condition on all the profiling characteristics of the respondents, some factors, in particular gender, cease to be significant, suggesting that gender differences in risk and loss attitudes might be due to other factors, such as income differences.

Keywords: behavioural finance, loss aversion, expected utility, survey data

JEL Classification: C83, C90, G40

Suggested Citation

Blake, David P. and Cannon, Edmund Stuart and Wright, Douglas, Quantifying Loss Aversion: Evidence from a UK Population Survey (October 1, 2019). Pensions Institute Discussion Paper, PI-1912, October 2019. Available at SSRN: https://ssrn.com/abstract=3552247 or http://dx.doi.org/10.2139/ssrn.3552247

David P. Blake (Contact Author)

City University London - Cass Business School ( email )

London, EC2Y 8HB
Great Britain
+44 (0) 20-7040-5143 (Phone)
+44 (0) 20-7040-8881 (Fax)

Edmund Stuart Cannon

University of Bristol - Department of Economics ( email )

Senate House
Tyndall Avenue
Bristol BS8 ITH
United Kingdom

Douglas Wright

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

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