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Social and Behavioral Sciences Commons

Open Access. Powered by Scholars. Published by Universities.®

2012

Finance

Myopic Loss Aversion

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Full-Text Articles in Social and Behavioral Sciences

Aggregated Versus Disaggregated Forward Looking Information: Effects On Risk Taking, Rishabh Parekh Jan 2012

Aggregated Versus Disaggregated Forward Looking Information: Effects On Risk Taking, Rishabh Parekh

CMC Senior Theses

In previous research, aggregation of returns has been found as a way to counteract the risk averse behavior that is the result of investors' myopia. This paper expands the study of aggregation by analyzing its effect on forward looking probabilities. Namely, through the disaggregation of future information, subjects become myopic and trade with varying risk preferences. In an experimental market, subjects trading securities with disaggregated forward looking information are found to 'buy high and sell low', while subjects trading the same securities, but with aggregated information, trade with more consistent risk preferences.