Quantifying Loss Aversion: Evidence from a UK Population Survey
Pensions Institute Discussion Paper, PI-1912, October 2019
89 Pages Posted: 16 Mar 2020
Date Written: October 1, 2019
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: Suggested Citation