Quantifying Loss Aversion: Evidence from a UK Population Survey

Journal of Risk and Uncertainty; https://doi.org/10.1007/s11166-021-09356-7

82 Pages Posted: 16 Mar 2020 Last revised: 18 Jan 2022

See all articles by David P. Blake

David P. Blake

City, University of London

E. S. Cannon

University of Bristol - Department of Economics

Douglas Wright

City University London - Sir John Cass Business School

Multiple version iconThere are 2 versions of this paper

Date Written: October 8, 2021

Abstract

We quantify differences in attitudes to loss from individuals with different demographic, personal and socio-economic characteristics. Our data are based on responses from an online survey of a representative sample of over 4000 UK residents and allow us to produce the most comprehensive analysis of the heterogeneity of loss aversion measures to date. Using the canonical model proposed by Tversky and Kahneman (1992), we show that responses for the population as a whole differ substantially from those typically provided by students (who form the basis of many existing studies of loss aversion). The average aversion to a loss of £500 relative to a gain of the same amount is 2.41, but loss aversion correlates significantly with characteristics such as gender, age, education, financial knowledge, social class, employment status, management responsibility, income, savings and home ownership. Other related 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: Loss aversion, Gender effects, Expected utility, Risk attitudes, Survey data

JEL Classification: G40, D40, C83, C90

Suggested Citation

Blake, David P. and Cannon, Edmund Stuart and Wright, Douglas, Quantifying Loss Aversion: Evidence from a UK Population Survey (October 8, 2021). Journal of Risk and Uncertainty; https://doi.org/10.1007/s11166-021-09356-7, Available at SSRN: https://ssrn.com/abstract=3552247 or http://dx.doi.org/10.2139/ssrn.3552247

David P. Blake (Contact Author)

City, University of London ( email )

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Edmund Stuart Cannon

University of Bristol - Department of Economics ( email )

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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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