Myopic Loss Aversion and Investment Decisions: From the Laboratory to the Field

50 Pages Posted: 3 May 2021 Last revised: 20 Jul 2021

See all articles by Kazi Iqbal

Kazi Iqbal

Bangladesh Institute of Development Studies (BIDS)

Asad Islam

Monash University - Department of Economics

John A. List

University of Chicago - Department of Economics; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Vy Nguyen

RMIT University

Date Written: April 2021

Abstract

Whether, and to what extent, behavioral anomalies uncovered in the lab manifest themselves in the field remains of first order importance in finance and economics. We begin by examining behavior of retail traders/investors making investment decisions in constructed laboratory markets. Our results show that the behaviors of the traders are consistent with myopic loss aversion. We combine the lab results with a unique individual-level matched dataset on daily stock market transactions and portfolio positions over a two year period. We find that lab behaviors help to predict, but do not fully capture, the essential real-world trading analogs of retail traders.

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Suggested Citation

Iqbal, Kazi and Islam, Asadul and List, John A. and Nguyen, Vy, Myopic Loss Aversion and Investment Decisions: From the Laboratory to the Field (April 2021). NBER Working Paper No. w28730, Available at SSRN: https://ssrn.com/abstract=3838495

Kazi Iqbal (Contact Author)

Bangladesh Institute of Development Studies (BIDS)

E-17, Agargao, Shere Bangla Nagar
Dhaka, 1207
Bangladesh

Asadul Islam

Monash University - Department of Economics ( email )

Department of Economics
Monash University
Caulfield East, Victoria
Australia
+61399032783 (Phone)

HOME PAGE: http://users.monash.edu/~asaduli/

John A. List

University of Chicago - Department of Economics ( email )

1126 East 59th Street
Chicago, IL 60637
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Vy Nguyen

RMIT University ( email )

124 La Trobe Street
Melbourne, 3000
Australia

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