Database: Beyond Myopic Loss Aversion: Experimental Evidence of Heuristics as Concurrent Drivers of Context-Dependent Financial Decisions
Description
This study analyzes how decision-making heuristics interact with Myopic Loss Aversion (MLA) in determining financial decision-making in environments of risk and ambiguity. The study argues that simple heuristics and attentional components coexist with loss aversion, shaping the decision-making process in a contextual manner. To test this proposition, an experiment was conducted with 231 participants, in which individuals made repeated decisions under different frequencies of investment outcome evaluation. A Loss Aversion Coefficient, a Minimax-Priority Index, a Preference Index, and an Asymmetry Index were constructed and empirically validated. The results indicate that loss aversion does not act in a one-dimensional way: while the Minimax heuristic systematically reduces the amount invested, loss aversion may, in certain contexts, be associated with greater risk propensity. Interactions with feedback frequency reveal that the decision-making environment reorganizes the relative weight of heuristics. Taken together, the findings reinforce that heuristics and biases are dynamic responses to the decision-making context, and occur in a manner that is complementary to the traditional logic of loss aversion-based models, such as Prospect Theory.