The effect of myopia and loss aversion on risk taking: An experimental test
Richard Thaler, Amos Tversky, Daniel Kahneman and Alan Schwartz test two predictions about myopic loss aversion, the combination of greater sensitivity to losses than to gains and a tendency to evaluate outcomes frequently. Investors who evaluate their investments less often should accept more risk, and removing losses by raising all payoffs should also increase risk taking. Both predictions are supported in an experiment on learning from experience, and the investors given the most frequent feedback took the least risk and earned the least.
Richard Thaler, Amos Tversky, Daniel Kahneman and Alan Schwartz test two predictions about myopic loss aversion, the combination of greater sensitivity to losses than to gains and a tendency to evaluate outcomes frequently. Investors who evaluate their investments less often should accept more risk, and removing losses by raising all payoffs should also increase risk taking. Both predictions are supported in an experiment on learning from experience, and the investors given the most frequent feedback took the least risk and earned the least.
Written from the abstract as published with the paper, read 2026-10-28.
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Thaler, R. H., Tversky, A., Kahneman, D., & Schwartz, A. (1997). The effect of myopia and loss aversion on risk taking: An experimental test. Quarterly Journal of Economics, 112(2), 647-661. doi:10.1162/003355397555226 https://doi.org/10.1162/003355397555226