Adaptive loss aversion and market experience

Loss Aversion, Asymmetric Market Comovements, and the Home Bias

Loss aversion has been used to explain why a high equity premium might be consistent with plausible levels of risk aversion. The intuition is that the different utility impact of wealth gains and losses leads loss-averse investors to behave similarly to investors with high risk aversion. But if so, should these agents not perceive larger gains from international diversification than standard ex...

Bias and Loss Aversion in the Market for Autos

Loss aversion and perceptionally risk aversion

This paper analyzes, for S-shaped value functions, the relations between loss aversion and perceptionally risk aversion (i.e. computed with the perceived probability weights) in Cumulative Prospect Theory . We show that perceptionally risk aversion for mixed sign lotteries is equivalent to weak (or strong) loss aversion, so this is the right assumption to get a sensible behavior towards risk. T...

Loss Aversion and Labor Supply

Loss Aversion and Labor Supply In many occupations workers’ labor supply choices are constrained by institutional rules regulating labor time and effort provision. This renders explicit tests of the neoclassical theory of labor supply difficult. Here we present evidence from studies examining labor supply responses in “neoclassical environments” in which workers are free to choose when and how ...

Myopic Loss Aversion Revisited

In this paper we reexamine several experimental papers on myopic loss aversion by analyzing individual rather than aggregate choice patterns. We find that the behavior of the majority of subjects is inconsistent with the hypothesis of myopic loss aversion.