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Media type:
E-Article
Title:
Risk Aversion or Myopia? Choices in Repeated Gambles and Retirement Investments
Contributor:
Benartzi, Shlomo;
Thaler, Richard H.
imprint:
Institute for Operations Research and the Management Sciences (INFORMS), 1999
Published in:Management Science
Language:
English
DOI:
10.1287/mnsc.45.3.364
ISSN:
0025-1909;
1526-5501
Origination:
Footnote:
Description:
<jats:p> We study how decision makers choose when faced with multiple plays of a gamble or investment. When evaluating multiple plays of a simple mixed gamble, a chance to win x or lose y, subjects show a sensitivity to the amount to lose on a single trial, holding the distribution of returns for the portfolio constant; that is, they display “myopic loss aversion.” Many subjects who decline multiple plays of such a gamble will accept it when shown the resulting distribution. This analysis is applied to the problem of retirement investing. We show that workers invest more of their retirement savings in stocks if they are shown long-term (rather than one-year) rates of return. </jats:p>