The disposition effect describes investors' common tendency of quitting a winning investment too soon and holding on to losing investments too long. Since Shefrin and Statman (1985), the two sides of the disposition effect, i.e. quot;selling winnersquot; and quot;holding losersquot;, have been...

In the emerging field of behavioral finance, including human behavior aspects and implications of cognitive phsychology and anthropology in decisions are considered. The formulated hypotheses were tested by way of 400 questionairres answered by students enrolled in MBA programs. The principal...

Recent literature has advocated that risk-taking behavior is influenced by prior monetary gains and losses. On one hand, after perceiving monetary gains, people are willing to take more risk (house-money effect). Another stream of the literature, based on prospect theory and loss aversion,...

We re-examine preference reversal data from previously published studies to (1) identify the effects of different incentive treatments and (2) determine the models that best explain data patterns across incentive treatments. Contrary to the quot;folk-wisdomquot; that incentives do not affect...

This experimental study, first, compares the individual valuations of two risk reduction mechanisms: self-insurance and self-protection. Second, it investigates these valuations when the loss amount is ambiguous, and compares these values with valuations when loss amounts are known. Results...

In Selten (1967) quot;Strategy Method,quot; the second mover in the game submits a complete strategy. This basic idea has been exported to nonstrategic experiments, where a participant reports a complete list of contingent decisions, one for each situation or state in a given sequence, out of...

We experimentally question the assertion of Prospect Theory that people display risk attraction in choices involving high-probability losses. Indeed, our experimental participants tend to avoid fair risks for large (up to 90), high-probability (80%) losses. Our research hinges on a novel...

When the performance of a risky asset is frequently assessed, the probability of detecting a loss is high, which averts the loss averse investors. This effect is known as myopic loss aversion (MLA). This paper reexamines several recent experimental studies documenting the existence of MLA. A...

This paper examines Chinese students' risk attitude using buying and selling experiments with lotteries. We found that subjects were more risk averse in the buying experiment than in the selling experiment, suggesting the endowment effect. In the selling experiment, subjects were risk loving...

An individual makes random errors when evaluating the expected utility of a risky lottery. Errors are symmetrically distributed around zero as long as an individual does not make transparent mistakes such as choosing a risky lottery over its highest possible outcome for certain. This stochastic...