Effects Of Myopic Loss Aversion On Risk Preference In Investment Decision-Making And Preliminary Analysis Of Its Reason

This research explored the influence of myopic loss aversion on risk preference in investment decision-making with the time horizon of an investment and the frequency of feedback on the information as two indicators of myopic loss aversion and imitation of real world investment decision-making as the experiment task. The whole research adopted computer programming technique and based on former researches. In order to preliminarily analyzing the inner reason of MLA, we introduced cognitive style in our research. We tried to analyze whether subjects with different cognitive styles have different MLA, and whether their cognitive styles influence their MLA performance, hence affect risk preference in investment decision-making.The first experiment discussed the influence of the time horizon of an investment and the frequency of feedback on the information on risk preference in investment decision-making. The results show that, the time horizon of an investment and the frequency of feedback on the information has the main effect on the risk preference in investment decision-making. If prolonging the time horizon of an investment, or lowering the frequency of feedback on the information, the investment on risky assets will be increase.The second experiment explored whether subjects with different cognitive styles have different MLA, and whether their cognitive styles influence their MLA performance. The results of the study indicated that cognitive style has the marginal significant effect on the risk preference in investment decision-making and subjects with different cognitive styles have different MLA performance.Basically, the experiments results correspond with previous Myopic Loss Aversion Theories. Besides, this research primarily analyzed the existence and reason of myopic loss aversion from the perspective of cognitive style, which deepened our understanding of myopic loss aversion.