
	Where results make sense

Topic: Loss aversion

Related Topics

Risk aversion

Risk Seeking

Prospect theory

Behavioral economics

Behavioral finance

Certainty equivalent

Risk

List of cognitive biases

False consensus effect

Value at risk

List of publications in economics

Zeigarnik effect

Stock image

Kenneth Arrow

Media bias

In the News (Thu 26 Nov 09)

Northern Trust

Marvin Harrison

Peter Chernin

Gary Locke

Match Play

Penelope Cruz

Mickey Rourke

AR Rahman

Danny Boyle

Hugh Jackman

	Loss aversion - Wikipedia, the free encyclopedia
		Some studies suggest that losses are as much as twice as psychologically powerful as gains.
		Loss aversion was first convincingly demonstrated by Amos Tversky and Daniel Kahneman.
		Though traditional economists consider this "endowment effect" and all other effects of loss aversion to be completely irrational, that is why it is so important to the fields of marketing and behavioral finance.
	en.wikipedia.org /wiki/Loss_aversion (584 words)

	[No title]
		Losses are found to have a larger impact on protection than gains, and the estimates of the coefficient of loss aversion are about 2.
		They indicate that losses have a larger impact on protection than gains, and the coefficient of loss aversion is estimated to be about 2, consistent with the results of the previous literature.
		They indicate that losses have a larger impact on protection than gains, and the coefficient of loss aversion is estimated to be about 2, consistent with the results of the precious literature.
	www.bsos.umd.edu /econ/cvs/cv2004/tovar.doc (8904 words)

	Equity premium puzzle - Wikipedia, the free encyclopedia
		To quantify the level of risk aversion implied, investors would have to be indifferent between a bet with a 50 percent chance of $50,000 or $100,000 and a certain payoff of $51,209.
		They assert that investors evaluate their portfolio in a relatively short sighted way and that, as loss aversion implies, they are highly sensitive to losses over this time period.
		The evaluation time period implied in their model by an equity premium of 6 percentage points and a 2x loss aversion multiplier (a general finding of loss aversion research) is approximately one year.
	en.wikipedia.org /wiki/Equity_premium_puzzle (576 words)

	Decision Science News: Loss Aversion
		Original prospect theory is in agreement with the new loss aversion condition, and there utility is capturing all effects of loss aversion.
		279) view of loss aversion is as follows: An individual is loss averse if she or he dislikes symmetric 50–50 bets and, moreover, the aversiveness to such bets increases with the absolute size of the stakes.
		Loss aversion, or the tendency for people to prefer avoiding losses over acquiring equivalent gains, is a much-cited psychological concept receiving more and more attention in economic analysis.
	www.dangoldstein.com /dsn/archives/2005/05/what_is_loss_av_1.html (1536 words)

	Freakonomics Blog » Loss Aversion in the N.F.L.
		Loss Aversion in the N.F.L. Football coaches are known for being extraordinarily conservative when it comes to calling a risky play, since a single bad decision, or even a good decision that doesn’t work out, can get you fired.
		My favorite example of someone resisting loss aversion and experiencing a positive outcome is the story of Aron Ralston, the hiker trapped under a boulder who was willing to accept a sure loss (amputating his arm) in order to minimize the risk of a greater loss (death).
		It’s a stretch to apply loss aversion to the example since p(loss) is actually greater with the field goal than the touchdown attempt.
	www.freakonomics.com /blog/2005/11/07/loss-aversion-in-the-nfl (2507 words)

	The concept of loss aversion
		Another anomaly to be understood is that we see losses and profits in isolation and not in totality.
		People when affected by loss aversion go for sure gains, take more risk when threatened with a loss, have preference for fixed income securities as against stocks and have a tendency to hold on to the losers and sell the winners.
		This fear is giving rise to loss aversion and at the same time provide an opportunity to buy fundamentally good stocks.
	www.rediff.com /money/2004/jul/20perfin.htm (1082 words)

	Myopic Loss Aversion
		The result is that the shorter the investment horizon, the more likely it is that an investor will experience a loss in the value his or her portfolio.
		Given that investors feel the pain of losses far greater than they feel the joy of gains, they are likely to not only experience disappointment if they check their portfolios with great frequency, but they are more likely to panic and sell as the pain of losses becomes intolerable.
		Behavioralists have used myopic loss aversion as one possible explanation for the answer to what is known in academic circles as the "equity risk premium puzzle." The puzzle is why the equity risk premium has been so large when there have been very few long periods of poor equity performance.
	www.indexfunds.com /articles/20021015_myopic_com_gen_LS.htm (886 words)

	The Endowment Effect, Loss Aversion, and Status Quo Bias
		The value function for losses is steeper than that for gains, losses "loom larger" than gains.
		* Status Quo Bias: One implication of loss aversion is that individuals have a strong tendency to remain at the status quo, because the disadvantages of leaving it loom larger than advantages.
		Loss Aversion: the disutility of giving up an object is greater than the utility associated with acquiring it.
	www.uoregon.edu /~sdhodges/458regrt.htm (2118 words)

	An Index Of Loss Aversion (ResearchIndex) (Site not responding. Last check: 2007-10-14)
		Loss aversion reflects the observed behavior of decision makers' being more sensitive to losses than to gains, resulting in a utility function that is steeper for losses than for gains.
		Much of the empirically observed risk aversion is due to loss aversion.
		1 The Endowment Eect, Loss Aversion, and Status Quo Bias: Anom..
	citeseer.ist.psu.edu /385908.html (554 words)

	Inside Influence Report (Site not responding. Last check: 2007-10-14)
		Loss aversion can explain a great deal of human behavior in the areas of finance, consumer behavior, and negotiation.
		For example, according to G. Richard Shell (1999), one consequence of loss aversion is that it often motivates inexperienced investors to hold on to stocks that have lost value since the date of purchase.
		Because selling the stock at that point would be to formally and irrevocably take a loss on the investment, many of these investors are reluctant to do so, a decision that is likely to end up in further stock price decline.
	www.insideinfluence.com /year05/09/loss (422 words)

	Sovereign debt and loss aversion
		Then, I estimate loss aversion and risk aversion parameters in a simple framework by GMM.
		The presence of loss aversion is supported by the data.
		The estimated coefficient of loss aversion is significant and quite close to the estimates obtained by other authors.
	escholarship.bc.edu /dissertations/AAI3142882 (234 words)

	An Experimental Test of Loss Aversion
		This paper experimentally investigates a preference condition for loss aversion in the framework of cumulative prospect theory (CPT).
		We propose the concepts of absolute and relative loss premiums in order to measure the extent of loss aversion and to derive notions of increasing, constant, and decreasing loss aversion.
		While in only one of the 28 choice situations analyzed loss neutrality and loss seeking can be rejected, about 51 percent of all choices are loss averse and, due to the large extent of loss aversion revealed by these choices, the average loss premium is positive for most choice situations.
	ideas.repec.org /a/kap/jrisku/v25y2002i3p233-49.html (338 words)

	ipedia.com: Loss aversion Article (Site not responding. Last check: 2007-10-14)
		Some studies suggest that losses are as much as twice as psychologically po...
		Though traditional economists consider this "endowment effect" and all other effects of loss averion to be completely irrational, that is why it is so important to the fields of marketing and behavioral finance.
		Tversky, A. & Kahneman, D. Loss Aversion in Riskless Choice: A Reference Dependent Model.
	www.ipedia.com /loss_aversion.html (284 words)

	CiteULike: Myopic Loss Aversion and the Equity Premium Puzzle (Site not responding. Last check: 2007-10-14)
		We dub this combination "myopic loss aversion." Using simulations, we find that the size of the equity premium is consistent with the previously estimated parameters of prospect theory if investors evaluate their portfolios annually.
		The story: investors evaluate their portfolio in a relatively short sighted way, loss aversion implies, they are highly sensitive to losses over this time period.
		The evaluation time period implied in their model by a 6% equity premium and a 2x loss aversion multiplier is approximately one year.
	www.citeulike.org /user/toomash/article/157072 (236 words)

	The Hindu Business Line : What is loss aversion?
		His action, called loss aversion, is typical of all small investors.
		The investor is, thus, a risk-seeker when faced with the prospect of losses, but is risk-averse when faced with the prospects of enjoying gains.
		The subjects predominantly chose the first option even though the mathematical expectation of losses was higher ($ -4,000 x 0.80 - $0 X 0.20 = $ -3,200).
	www.blonnet.com /iw/2002/12/01/stories/2002120100741000.htm (351 words)

	FuturePundit: Capuchin Monkeys Show Same Loss Aversion Economic Behavior As Humans
		This phenomenon, known as “loss aversion,” refers to the tendency for people to strongly prefer avoiding losses to acquiring gains.
		To learn about work done on humans with loss aversion read about the classic experiment on risk aversion done by Kahneman, Knetsch, and Thaler with coffee mugs.
		For example, to overcome resistance to regulatory changes due to status quo bias loss aversion Lynne Kiesling of Knowledge Problem argues that experiments to demonstrate the effects of policy changes might help reduce the resistance to changes in the regulatory status quo.
	www.futurepundit.com /archives/002849.html (1115 words)

	AMCA: Loss Aversion Fictitious Play by Rimawan Pradiptyo (Site not responding. Last check: 2007-10-14)
		We extended fictitious play in which the players' characteristic of loss aversion has been taken into account in the learning process.
		Loss Aversion Ficitious Play (LAFP) did not only depend on the structure of the game and the players' beliefs, but also on the loss aversion coefficient and the reference point (aspiration level).
		Since the loss aversion coefficient and the aspiration level affect the learning process, it is possible to construct the learning process between the heterogeneous players.
	at.yorku.ca /c/a/f/c/40.htm (192 words)

	JMR2A Summary & Biography - American Marketing Association - www.marketingpower.com
		Since the original demonstrations of loss aversion, many studies have shown loss aversion in numerous domains, from individual investor behavior, to reactions to price and quality changes in orange juice, to basketball tickets, to clean air.
		Another posited limitation of loss aversion is that goods given up as part of a transaction that replaces the benefits of the forfeited good are not subject to loss aversion.
		However, if the car is given up as part of a purchase of a new car, there is no loss aversion for the car, inducing consumers to demand much less (about half as much) compensation for giving up the same car.
	www.marketingpower.com /live/www.marketingpower.com/content25427.php (958 words)

	Loss Aversion, Risk, & Framing: The Psychology of an Influence Strategy
		Since losses loom larger than gains, it appears that humans follow conservative strategies when presented with a positively-framed dilemma, and risky strategies when presented with negatively-framed ones.
		However, when the question was framed negatively, and physicians were concentrating on losses rather than gains, they voted in a dramatically different fashion.
		The brochures were identical in terms of content, but one stressed the gains associated with performing a BSE, and the other focused on the losses associated with inaction.
	www.workingpsychology.com /lossaver.html (1180 words)

	[No title] (Site not responding. Last check: 2007-10-14)
		Specifically, an argument can be made that people's aversion to loss will preclude any radical change in the type of politicians elected to office.
		However, owing to people's loss aversion, the chances of his election are quite low.
		This loss aversion will force people to suffer a much larger decline in quality of life than would be the case with a more equitable treatment of loss and gain.
	darkwing.uoregon.edu /~bfmalle/jdm/Arthur1.html (605 words)

	A Comparison of Two Theories of Loss Aversion in Risky Decision Making
		Loss aversion refers to the finding that many people would prefer a small amount of cash rather than accept a mixed gamble with equal or higher expected value.
		For example, many people would rather accept a sure gain of $1, rather than accept a 50-50 gamble to either win $100 or lose $80, even though the gamble has a higher expected value ($10).There are two major theories to account for this phenomenon.
		The first is Cumulative Prospect Theory (CPT), which holds that the loss of $80 has stronger negative utility than the gain of $100 has positive utility.
	repositories.cdlib.org /uci_imbs_colloquium/Winter2005/6 (242 words)

	SSRN-Hedge Fund Payoffs and Loss Aversion by Arjen Siegmann, Andre Lucas (Site not responding. Last check: 2007-10-14)
		For an agent with loss averse preferences we derive the optimal payoffs with one option.
		A total of four different payoffs are found to be optimal, depending on the strike price of the option and whether the initial position of the agent is one of surplus or shortfall.
		Furthermore, the steepness of the payoffs under loss aversion increases in the difference to an initial reference point, which corresponds to hedge funds increasing their risk when performance falls further behind.
	papers.ssrn.com /sol3/papers.cfm?abstract_id=424367 (344 words)

	MediaSentiment : Predicting how crowd reaction to news will impact your investment
		Fear of loss may be the only human emotion more potent on the market than simple greed.
		While rationally, investors should be just as emotionally involved in making a $10 gain as preventing a $10 loss, there are a number of explanations for this irrational loss-averse behavior, as well as for the sometimes volatile and unexpected effects of negative news on the market.
		Universally, loss aversion is a factor that can influence us today in the most unexpected of ways, including how we invest.
	www.mediasentiment.com /demo/08_08_2005.html (1265 words)

	EconPapers: Myopic Loss Aversion, Asymmetric Correlations, and the Home Bias
		Abstract: Myopic 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 it plays the role of high risk aversion in portfolio choice.
		We analyze the portfolio problem of a myopic loss averse investor who has to choose between home and foreign equities in the presence of asymmetrically correlated returns.
	econpapers.repec.org /paper/ecmlatm04/61.htm (254 words)

	The Quarterly Journal of Economics - The Effect of Myopia and Loss Aversion on Risk Taking: An Experimental Test - The ...
		Myopic loss aversion in the combination of a greater sensitivity to losses than to gains and a tendency to evaluate outcomes frequently.
		Two implications of myopic loss aversion are tested experimentally.
		Investors who display myopic loss aversion will be more willing to accept risks if they evaluate their investments less often.
	mitpress.mit.edu /catalog/item?tid=414&ttype=6 (146 words)

	CEPR Discussion Paper Abstracts
		We examine a simple measure of portfolio performance based on prospect theory, which captures not only risk and return but also reflects differential aversion to upside and downside risk.
		The measure we propose is a ratio of gains to losses, with the gains and losses weighted (if desired) to reflect risk-aversion for gains and risk-seeking for losses.
		It can also be interpreted as the weighted ratio of the value of a call option to a put option, with the benchmark as the exercise price.
	www.cepr.org /pubs/new-dps/dplist.asp?dpno=5173 (274 words)

	Equity premium puzzle - Definition of word from Investor Dictionary - Define meaning of Equity premium puzzle
		To quantify the level of risk aversion implied, investors would have to be indifferent betwen a bet with a 50% chance of $50,000 or $100,000 and a certain payoff of $51,209.
		Kocherlakota (1996) presents a detailed analysis of these explanations and strongly concludes that the puzzle is real and that the fundamental puzzle, the excessively high implied level of risk aversion, remains unexplained.
		The evaluation time period implied in their model by a 6% equity premium and a 2x loss aversion multiplier (a general finding of loss aversion research) is approximately one year.
	www.investordictionary.com /definition/equity+premium+puzzle.aspx (384 words)

	NCPA - Economic Issues - Loss Aversion Explains Risk Aversion (Site not responding. Last check: 2007-10-14)
		Rabin argues that the reason people are risk adverse is that they are loss averse: they fear losing the value they have more than they are attracted to the possibility of big gains.
		Rabin says this is a better explanation of loss aversion than the diminishing utility of wealth.
		Source: "Risk-Averse or Loss-Averse?" Economic Intuition, Fall 2000; based on Matthew Rabin, "Risk Aversion and Expected Utility Theory: A Calibration Theorem," Econometrica, Vol.
	www.ncpa.org /pd/economy/pd022201f.html (346 words)

Try your search on: Qwika (all wikis)