European Business Schools Librarian's Group

Department of Economics Working Papers,
Vienna University of Economics and Business, Department of Economics

No 116: Causes, consequences, and cures of myopic loss aversion - An experimental investigation

Gerlinde Fellner () and Matthias Sutter ()
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Gerlinde Fellner: Department of Economics, Vienna University of Economics & B.A.
Matthias Sutter: University of Innsbruck, Deparment of Public Finance, and University of Goeteborg

Abstract: We examine in an experiment the causes, consequences and possible cures of myopic loss aversion (MLA) for investment behaviour under risk. We find that both, investment horizons and feedback frequency contribute almost equally to the effects of MLA. Longer investment horizons and less frequent feedback lead to higher investments. However, when given the choice, subjects prefer on average shorter investment horizons and more frequent feedback. Exploiting the status quo bias by setting a long investment horizon or low feedback frequency as a default turns out to be a successful behavioural intervention that increases investment levels.

JEL-codes: C91; D80; G11 January 2008

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