This study examines firms' voluntary disclosure of tax loss carryforward (TLCF) information. We measure the content and presentation of TLCF information by a disclosure score based on hand collected data from annual reports. Our identification strategy employs new proprietary data to control for...

When trading in the call and put contracts of option chains, the portfolios of strikes must be selected. The trader must also decide whether to take long or short positions at the selected strikes. Dynamic strategies for making these decisions are discussed in this paper. On any day, the...

This paper investigates a dynamic liability-driven investment policy for defined-benefit (DB) plans by incorporating the loss aversion of a sponsor, who is assumed to be more sensitive to underfunding than overfunding. Through the lens of prospect theory, we first set up a loss-aversion utility...

Narrow bracketing in combination with loss aversion has been shown to reduce individual risk-taking. This is known as myopic loss aversion (MLA) and has been corroborated by many studies. Recent evidence has contested this notion indicating that MLA's applicability is confined to highly...

To date, the studies on managerial loss aversion have produced contradictory findings, making it impossible to: (i) identify the ultimate impact of managerial loss aversion on the value that organisations create for themselves and for their stakeholders, and (ii) mitigate the effect of...

We run experiments of first-price auctions with two groups, by which we directly detect the presence of bidders’ loss-aversion. Each human bidder bids against three preprogrammed computer bidders. The computer bidders independently draw their values from the uniform distribution and bid their...

The endowment effect - the tendency to place greater value on things when you own them - is regarded as one of the most widely studied judgment and decision-making phenomena. This paper investigates whether the endowment effect works in intimate relationships and if so, finds out how the process...

Banks are considered to have failed in overcoming the 2008 financial crisis because credit policies are still procyclical. The COVID-19 pandemic will cause the world’s economic decline, causing default rates to increase. Banks need to increase their prudence in lending through the...

We focus on model risk and risk sensitivity when addressing the insurability of cyber risk. The standard statistical approaches to assessment of insurability and potential mispricing are enhanced in several aspects involving consideration of model risk. Model risk can arise from model...

Even though financial risk management has the ability to generate value, the use of financial derivatives among nonfinancial corporations remains limited. We identify a channel that contributes to this limited use: the decoupling of derivatives losses and operational gains. Specifically, firms...

Optimal reinsurance problems under the risk measures, such as Value-at-Risk (VaR) and Tail-Value-at-Risk (TVaR), have been studied in recent literature. However, losses based on VaR may be underestimated and TVaR allows us to account better for catastrophic losses. In this paper, we propose a...

In this paper, we developed a Shiny-based application called AutoReserve. This application serves as a tool used for a variety of types of loss reserving. The primary target audience of the app is personal auto actuaries, who are professionals in the insurance industry specializing in assessing...

Food loss is a critical issue in Africa, but investigation has mainly been limited to quantity loss. Economic losses are likely to be more significant but are widely ignored. Regarding ruminant-related losses, it remains challenging to identify the optimal harvest point. Focusing on Sahelian...

This study measures the differences in ambiguity attitudes of groups and individuals in the gain and loss domain. We elicit the ambiguity attitudes and ambiguity-generated insensitivity for natural temperature events. We do not find significant differences between individuals and groups in our...

The interdependence between multiple lines of business has an important impact on determining loss reserves and risk capital, which are crucial for the solvency of a property and casualty (P&C) insurance company. In this work, we introduce the two-stage inference method using the Sarmanov family...

Reference-dependent preferences can explain several puzzling observations about organizational change. We introduce a dynamic model in which a loss-neutral firm bargains with loss-averse workers over organizational change and wages. We show that change is often stagnant or slow for long periods...

I analyze sequential auctions with expectations-based loss-averse bidders who have independent private values and unit demand. Equilibrium bids are history dependent and subject to a “discouragement effect”: the higher is the winning bid in the current round, the less aggressive are the bids...

We consider a simple, two period, consumption-savings model with future income uncertainty that examines the interplay of savings, precautionary savings, loss aversion, and risk. We provide the relevant theory, followed by empirical tests based on subject-specific choices, and the measurement of...

This study examines the effect of loss aversion on the reservation value of a house seller. Contrary to the finding of a prior theoretical study by Buisson (2016), we show that loss aversion can increase the reservation value as hypothesized in many empirical literatures. Loss aversion makes the...

The disposition effect occurs when investors hold unrealized loss assets for too long and sell unrealized profit assets too quickly. However, some studies argue that investors tend to be risk-averse in the area of unrealized capital losses. We confirm that these two views of the disposition...

We investigate the role of social structure in mortgage market risk-taking behavior and its economic implications in terms of mortgage loss. Focusing on conforming loans, we start by showing that the local risk-taking atmosphere is associated with higher loan-to-value ratios. Next, we verify the...

The crypto industry has been hit hard with various market forces and scams, leaving investors with trillion-dollar losses in recent years. The appropriate tax treatment of such losses has yet to be fully examined, as there is scant guidance and a dearth of academic literature on the subject....

Loss aversion postulates that people prefer avoiding losses over acquiring gains of equal size. It is a central part of prospect theory and, according to Daniel Kahneman, "the most significant contribution of psychology to behavioral economics" (Kahneman, 2011, p. 300). It has powerful...