Some (Mis)facts about Myopic Loss Aversion

  1. Iñigo Iturbe-Ormaetxe 1
  2. Giovanni Ponti 1
  3. Josefa Tomás 1
  1. 1 Universitat d'Alacant
    info

    Universitat d'Alacant

    Alicante, España

    ROR https://ror.org/05t8bcz72

Revista:
Working papers = Documentos de trabajo: Serie AD

Año de publicación: 2015

Número: 9

Páginas: 1-29

Tipo: Documento de Trabajo

DOI: 10.12842/WPASAD-2015-09 DIALNET GOOGLE SCHOLAR lock_openAcceso abierto editor

Resumen

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.