Myopic Loss Aversion and House-Money Effect Overseas: an experimental approach

José Fernandes, Juan Peña and Benjamin Tabak

No 115, Working Papers Series from Central Bank of Brazil, Research Department

Abstract: Recent literature has found two behavioral effects - house-money and myopic loss aversion (MLA) - in several experimental designs. We show that although we can find a house-money effect using survey methods this evidence disappears when we study investment decision within a multi-period investment experiment. Loss aversion is found to govern the risk-taking behavior of subjects in dynamic settings, overcoming the house-money effect. These results are robust to experiments conducted in two different countries, Spain and Brazil.

Date: 2006-09
New Economics Papers: this item is included in nep-cbe, nep-exp and nep-upt
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Citations: View citations in EconPapers (1)

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