Causes, consequences, and cures of myopic loss aversion –An experimental investigation

We examine in an experiment the causes, consequences and possible cures ofmyopic loss aversion (MLA) for investment behaviour under risk. We find thatboth, investment horizons and feedback frequency contribute almost equally tothe effects of MLA. Longer investment horizons and less frequent feedbacklead to higher investments. However, when given the choice, subjects prefer onaverage shorter investment horizons and more frequent feedback. Exploitingthe status quo bias by setting a long investment horizon or low feedbackfrequency as a default turns out to be a successful behavioural intervention thatincreases investment levels.