Empirical Evidence of Anchoring and Loss Aversion from Art Auctions

Abstract

We provide evidence for the behavioral biases of anchoring and loss aversion in paintings sold at auction. We find that anchoring is more important for items that are resold quickly, and that the effect of loss aversion increases with the time that a painting is held. This evidence contributes significantly to the empirical evidence of the endowment effect: of increasing loss aversion with the length of holding. However, we do not find evidence that investors can take advantage of these behavioral biases.

Keywords: Anchoring, Loss Aversion

JEL Classification: G02, G12, Z11