Economics at your fingertips  

Some (Mis)facts about Myopic Loss Aversion

Inigo Iturbe-Ormaetxe, Giovanni Ponti () and Josefa Tomás Lucas ()
Additional contact information
Josefa Tomás Lucas: Universidad de Alicante

Working Papers. Serie AD from Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie)

Abstract: Gneezy and Potters (1997) run an experiment to test the empirical content of Myopic Loss Aversion (MLA). They find that the attractiveness of a risky asset depends upon the investors’ time horizon: consistently with MLA, individuals are more willing to take risks when they evaluate their investments less frequently. This paper shows that these experimental findings can be easily accommodated by the most standard version of Expected Utility Theory, namely a CRRA specification. Additionally, we use four different datasets to estimate a CRRA model and two alternative MLA versions, together with various mixture specifications of the two competing models. Our econometric exercise finds little evidence of subjects’ loss aversion, which provides empirical ground for our theoretical claim.

Keywords: Expected Utility Theory; Myopic Loss Aversion; Evaluation Period (search for similar items in EconPapers)
JEL-codes: C91 D14 D81 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2015-11
New Economics Papers: this item is included in nep-cbe, nep-exp and nep-upt
References: View references in EconPapers View complete reference list from CitEc

Published by Ivie

Downloads: (external link) Fisrt version / Primera version, 2015 (application/pdf)

Related works:
Working Paper: Some (Mis)facts about Myopic Loss Aversion (2015) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this paper

More papers in Working Papers. Serie AD from Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) Contact information at EDIRC.
Bibliographic data for series maintained by Departamento de Edición ().

Page updated 2024-05-16
Handle: RePEc:ivi:wpasad:2015-09