Evaluation Periods and Asset Prices in a Market Experiment

Posted: 13 Oct 2003

See all articles by Uri Gneezy

Uri Gneezy

University of California, San Diego (UCSD) - Rady School of Management

Arie Kapteyn

Dornsife Center for Economic and Social Research - University of Southern California; IZA Institute of Labor Economics; National Bureau of Economic Research (NBER)

Johannes (Jan) J. M. Potters

Tilburg University - CentER

Abstract

We test whether the frequency of feedback information about the performance of an investment portfolio and the flexibility with which the investor can change the portfolio influence her risk attitude in markets. In line with the prediction of myopic loss aversion (Benartzi and Thaler (1995)), we find that more information and more flexibility result in less risk taking. Market prices of risky assets are significantly higher if feedback frequency and decision flexibility are reduced. This result supports the findings from individual decision making, and shows that market interactions do not eliminate such behavior or its consequences for prices.

Suggested Citation

Gneezy, Uri and Kapteyn, Arie and Potters, Johannes (Jan) J. M., Evaluation Periods and Asset Prices in a Market Experiment. Journal of Finance, Vol. 58, pp. 821-838, April 2003, Available at SSRN: https://ssrn.com/abstract=416666

Uri Gneezy (Contact Author)

University of California, San Diego (UCSD) - Rady School of Management ( email )

9500 Gilman Drive
Rady School of Management
La Jolla, CA 92093
United States

Arie Kapteyn

Dornsife Center for Economic and Social Research - University of Southern California ( email )

635 Downey Way
Los Angeles, CA 90089-3332
United States
310-448-5383 (Phone)

IZA Institute of Labor Economics

P.O. Box 7240
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Germany

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Johannes (Jan) J. M. Potters

Tilburg University - CentER ( email )

Department of Economics
P.O. Box 90153
5000 LE Tilburg
Netherlands
+31 13 466 8204 (Phone)
+31 13 466 3042 (Fax)

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