top of page

Myopic Loss Aversion

Definition 1

Myopic loss aversion occurs when investors take a view of their investments that is strongly focused on the short term, leading them to react too negatively to recent losses, which may be at the expense of long-term benefits (Thaler et al., 1997). This phenomenon is influenced by narrow framing, which is the result of investors considering specific investments (e.g. an individual stock or a trade) without taking into account the bigger picture (e.g. a portfolio as a whole or a sequence of trades over time) (Kahneman & Lovallo, 1993). A large-scale field experiment has shown that individuals who receive information about investment performance too frequently tend to underinvest in riskier assets, losing out on the potential for better long-term gains (Larson et al., 2016).

Source: Behavioral Economics

Definition 2

bottom of page