Giovanni Ponti (University of Alicante)

Date(s): Wednesday 18th November 2015 (14:00-15:00)
Description: This week's seminar will be given by Giovanni Ponti from the University of Alicante. His research interests are "Behavioral; Experimental and Network Economics; Industrial Organization".

Title: Some (Mis)facts about Myopic Loss Aversion

Abstract: Gneezy and Potters (1997) run an experiment to test the empirical content of Myopic Loss Aversion (MLA). They find that the attractiveness of a risky asset depends upon the investors’ time horizon: consistently with MLA, individuals are more willing to take risks when they evaluate their investments less frequently. This paper shows that these experimental findings can be easily accommodated by the most standard version of Expected Utility Theory, namely a CRRA specification. Additionally, we use four different datasets to estimate a CRRA model and two alternative MLA versions, together with various mixture specifications of the two competing models. Our econometric exercise finds little evidence of subjects’ loss aversion, which provides empirical ground for our theoretical claim.

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