• Media type: E-Article
  • Title: The Realization Effect: Risk-Taking after Realized versus Paper Losses
  • Contributor: Imas, Alex
  • Published: American Economic Association, 2016
  • Published in: The American Economic Review, 106 (2016) 8, Seite 2086-2109
  • Language: English
  • ISSN: 0002-8282
  • Origination:
  • Footnote:
  • Description: <p>Understanding how prior outcomes affect risk attitudes is critical for the study of choice under uncertainty. A large literature documents the significant influence of prior losses on risk attitudes. The findings appear contradictory: some studies find greater risk-taking after a loss, whereas others show the opposite—that people take on less risk. I reconcile these seemingly inconsistent findings by distinguishing between realized versus paper losses. Using new and existing data, I replicate prior findings and demonstrate that following a realized loss, individuals avoid risk; if the same loss is not realized, a paper loss, individuals take on greater risk.</p>