How loss averse are investors in financial markets?

Soosung Hwang () and Steve E. Satchell

Journal of Banking & Finance, 2010, vol. 34, issue 10, 2425-2438

Abstract: We investigate loss aversion in financial markets using a typical asset allocation problem. Our theoretical and empirical results show that investors in financial markets are more loss averse than assumed in the literature. Moreover, loss aversion changes depending on market conditions; investors become far more loss averse during bull markets than during bear markets, indicating their more profound disutility for losses when others enjoy gains. Contrary to most previous results, we find that investors are more sensitive to changes in losses than changes in gains.

Keywords: Loss; aversion; utility; Asset; allocation; Pension; funds (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (41)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:34:y:2010:i:10:p:2425-2438

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