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Myopic loss aversion and market experience

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  • Mayhew, Brian W.
  • Vitalis, Adam

Abstract

We probe the boundaries of myopic loss aversion (MLA) theory through market treatments designed to reduce the MLA effect. Our market settings separate investment commitment from information frequency, display a running average asset value and explore the influence of participant experience. The market-based results suggest MLA persists with inexperienced participants despite efforts to mitigate MLA. Prices in markets with returning participants do not display an MLA effect. However, the same experienced participants individually succumb to MLA in an allocation setting immediately following the market. Overall, our results suggest that, while market experience mitigates the MLA effect, participants do not transfer these results to other settings.

Suggested Citation

  • Mayhew, Brian W. & Vitalis, Adam, 2014. "Myopic loss aversion and market experience," Journal of Economic Behavior & Organization, Elsevier, vol. 97(C), pages 113-125.
    • Handle: RePEc:eee:jeborg:v:97:y:2014:i:c:p:113-125
    DOI: 10.1016/j.jebo.2013.10.007
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