Does Binding of Feedback Influence Myopic Loss Aversion? An Experimental Analysis

21 Pages Posted: 2 Dec 2003

See all articles by Martin Weber

Martin Weber

University of Mannheim - Department of Banking and Finance

Thomas Langer

University of Muenster - Finance Center

Date Written: October 2003

Abstract

The feedback frequency and the length of commitment are two important features of investment alternatives in intertemporal decision-making. So far, empirical research has shown that a lower feedback frequency combined with a longer binding period decreases myopia and thereby increases the willingness to invest into a risky asset. Almost nothing is known, however, about the isolated effect of each variable and about a possible interaction of these variables. In an experimental study, we disentangle the intertwined manipulation of feedback frequency and binding period, commonly used in previous research, to analyse how both variables alone contribute to the change in myopia. We find a strong effect depending on the length of commitment, a much less pronounced effect of feedback and a strong interaction between both variables. The results have important implications for real world intertemporal decision-making.

Keywords: Intertemporal decision-making, myopic loss aversion, feedback frequency, length of commitment, evaluation period

Keywords: Intertemporal decision-making, myopic loss aversion, feedback frequency, length of commitment, evaluation period

JEL Classification: D80, G10

Suggested Citation

Weber, Martin and Langer, Thomas, Does Binding of Feedback Influence Myopic Loss Aversion? An Experimental Analysis (October 2003). Available at SSRN: https://ssrn.com/abstract=475081

Martin Weber

University of Mannheim - Department of Banking and Finance ( email )

D-68131 Mannheim
Germany
+49 621 181 1532 (Phone)
+49 621 181 1534 (Fax)

Thomas Langer (Contact Author)

University of Muenster - Finance Center ( email )

Universitatsstr. 14-16
Muenster, 48143
Germany
+49 251 83 22033 (Phone)

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