Do Financial Advisors Exhibit Myopic Loss Aversion?

Financial Markets and Portfolio Management, Vol. 24., No. 2, pp. 159-170, 2010

Posted: 18 Jun 2010

Date Written: December 23, 2009

Abstract

Myopic loss aversion (MLA) has been proposed as an explanation for the equity premium puzzle, and a number of experiments on students indicate that people do exhibit MLA. However, many people do not rely on their own judgment when making investment decisions, but obtain help from financial investment advisors on how to allocate their wealth. The preferences and choices of financial advisors are thus important for understanding investment behavior. In this paper we make use of 50 professional financial advisors to examine whether they exhibit behavior consistent with MLA. Indeed, we find that they behave consistently with MLA to a larger extent than students.

Keywords: Myopic Loss Aversion, Experiment

JEL Classification: C91, D81, G11

Suggested Citation

Eriksen, Kristoffer Wigestrand and Kvaloy, Ola, Do Financial Advisors Exhibit Myopic Loss Aversion? (December 23, 2009). Financial Markets and Portfolio Management, Vol. 24., No. 2, pp. 159-170, 2010 , Available at SSRN: https://ssrn.com/abstract=1626709

Kristoffer Wigestrand Eriksen (Contact Author)

University of Stavanger ( email )

PB 8002
Stavanger, 4036
Norway

Ola Kvaloy

University of Stavanger ( email )

N-4036 Stavanger
Norway

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