Publication: Loss-aversion and household portfolio choice
Issued Date
2010-06-01
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ISSN
09275398
Other identifier(s)
2-s2.0-77951497805
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Mahidol University
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SCOPUS
Bibliographic Citation
Journal of Empirical Finance. Vol.17, No.3 (2010), 441-459
Suggested Citation
Stephen G. Dimmock, Roy Kouwenberg Loss-aversion and household portfolio choice. Journal of Empirical Finance. Vol.17, No.3 (2010), 441-459. doi:10.1016/j.jempfin.2009.11.005 Retrieved from: https://repository.li.mahidol.ac.th/handle/20.500.14594/29049
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Title
Loss-aversion and household portfolio choice
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Abstract
In this paper we empirically test if loss-aversion affects household participation in equity markets, household allocations to equity, and household allocations between mutual funds and individual stocks. Using household survey data, we obtain direct measures of each surveyed household's loss-aversion coefficient from questions involving hypothetical payoffs. We find that higher loss-aversion is associated with a lower probability of participation. We also find that higher loss-aversion reduces the probability of direct stockholding by significantly more than the probability of owning mutual funds. After controlling for sample selection we do not find a relationship between loss-aversion and portfolio allocations to equity. © 2009 Elsevier B.V.