Loss Aversion in Financial Markets

Liyan Yang

The Journal of Mechanism and Institution Design, 2019, vol. 4, issue 1, 119-137

Abstract: Experimental evidence suggests that people are more sensitive to losses than gains by a factor of about two. Researchers have drawn implications from loss aversion to understand various aspects of individual decisions and asset prices in financial markets. At the current stage, some ancillary assumptions have been made in deriving these implications. Loss aversion affects financial markets through affecting the risk attitudes of market participants. Taken as a whole, loss aversion is a useful ingredient in helping us understand financial markets.

Keywords: Loss aversion; risk attitude; anomalies. (search for similar items in EconPapers)
JEL-codes: D50 G11 G12 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:jmi:articl:jmi-v4i1a5

DOI: 10.22574/jmid.2019.11.005

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