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2 edition of Mental accounting, loss aversion, and individual stock returns found in the catalog.

Mental accounting, loss aversion, and individual stock returns

Nicholas Barberis

Mental accounting, loss aversion, and individual stock returns

by Nicholas Barberis

  • 246 Want to read
  • 39 Currently reading

Published by National Bureau of Economic Research in Cambridge, MA .
Written in English

    Subjects:
  • Risk perception -- Economic aspects.,
  • Stocks -- Prices.,
  • Portfolio management.,
  • Rate of return.

  • Edition Notes

    StatementNicholas Barberis, Ming Huang.
    SeriesNBER working paper series -- no. 8190, Working paper series (National Bureau of Economic Research) -- working paper no. 8190.
    ContributionsHuang, Ming., National Bureau of Economic Research.
    The Physical Object
    Pagination55 p. :
    Number of Pages55
    ID Numbers
    Open LibraryOL22418356M

    Nicholas C. Barberis, NBER and University of Chicago, and Ming Huang, Stanford University, "Mental Accounting, Loss Aversion, and Individual Stock Returns". Discussant: Richard H. Thaler. Matthew Rabin, University of California, Berkeley, "Inference by Believers in the Law of Small Numbers". Discussant: Sendhil Mullainathan, NBER and MIT. Bhaskaran Swaminathan and Charles M. C. Lee, . mental accounting. HYPOTHESES Following the line of research on applying prospect theory and mental accounting in studying stock investor behaviors, this study utilizes the ideas of loss aversion and narrow framing in understanding different stock market reactions to .

      Another behavioral explanation for the value premium is loss aversion. Nicholas Barberis and Ming Huang, authors of the study “Mental Accounting, Loss Aversion, and Individual Stock Returns,” explain that the size of investor loss aversion depends on whether the individual has recently experienced gains or losses. They write: “A loss.   The loss aversion leads investors to avoid realising losses whereas risk-aversion makes them book gains soon. Mental accounting Think about an investor who is .

    Mental Accounting, Loss Aversion, and Individual Stock Returns. The authors study equilibrium firm‐level stock returns in two economies: one in which investors are loss averse over the fluctuations of their stock portfolio, and another in which they are loss averse over the fluctuations of individual . Nicholas C. Barberis, NBER and University of Chicago, and Ming Huang, Stanford University, "Mental Accounting, Loss Aversion and Individual Stock Returns" Discussant: Richard H. Thaler Matthew Rabin, University of California, Berkeley, "Inference by Believers in the Law of Small Numbers" Discussant: Sendhil Mullainathan, NBER and MIT.


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Mental accounting, loss aversion, and individual stock returns by Nicholas Barberis Download PDF EPUB FB2

Mental Accounting, Loss Aversion, and Individual Stock Returns. Nicholas Barberis. Stephan Muehlbacher, Erich Kirchler, Mental accounting of income tax and value added tax among self-employed business owners, Journal of Economic Psychology, /, ().Cited by: Barberis and Huang () conducted research on mental accounting, loss aversion, and individual stock returns.

They consider a form of MA as investors' concern about return/gains and risk/losses. We study equilibrium firm‐level stock returns in two economies: Mental Accounting, Loss Aversion, and Individual Stock Returns.

Nicholas Barberis. In that economy, the typical individual stock return has a high mean and excess volatility, and there is a large value premium in the cross section which can, to some extent, be captured by Cited by: Mental Accounting, Loss Aversion, and Individual Stock Returns.

In equilibrium, under this form of mental accounting, individual stock returns have a high mean, are more volatile than their underlying cash flows, and are slightly predictable in the time series. In the cross section, there is a large value premium: Stocks with low price.

CiteSeerX - Document Details (Isaac Councill, Lee Giles, Pradeep Teregowda): We study equilibrium firm-level stock returns in two economies: one in which investors are loss averse over the fluctuations of their stock portfolio, and another in which they are loss averse over the fluctuations of individual stocks that they own.

Both approaches can shed light on empirical phenomena, but we find. Mental Accounting, Loss Aversion, and Individual Stock Returns Nicholas Barberis, Ming Huang.

NBER Working Paper No. Issued in March NBER Program(s):Asset Pricing We study equilibrium firm-level stock returns in two economies: one in which investors are loss averse over the fluctuations of their stock portfolio and another in which they are loss averse over the fluctuations of.

Downloadable. We study equilibrium firm-level stock returns in two economies: one in which investors are loss averse over the fluctuations of their stock portfolio and another in which they are loss averse over the fluctuations of individual stocks that they own.

Both approaches can shed light on empirical phenomena, but we find the second approach to be more successful: in that economy, the. Mental accounting is biased toward selling the winner even though selling the loser is usually the rational decision, due to tax loss benefits as well as the fact that the losing stock.

Yet perhaps even more troublesome than these errors is the phenomenon known as “mental accounting.” Mental accounting refers to the tendency of humans to develop and make decisions based on purely mental categories.

Although they seem rational, the categories we create are often wholly arbitrary — and in some cases, dangerously misleading.

Mental accounting is a concept associated with the work of Richard Thaler (see Thaler,for a summary). According to Thaler, people think of value in relative rather than absolute terms. They derive pleasure not just from an object’s value, but also the quality of the deal –.

We would like to show you a description here but the site won’t allow more. Mental Accounting, Loss Aversion, and Individual Stock Returns by Nicholas Barberis, Ming Huang - THE JOURNAL OF FINANCE • VOL.

LVI, NO. 4 • AUGUST Get this from a library. Mental accounting, loss aversion, and individual stock returns. [Nicholas Barberis; Ming Huang; National Bureau of Economic Research.]. Mental Accounting, Loss Aversion, and Individual Stock Returns value, while requiring a lower rate of return.

But if we accept O'Dean's evidence that investors tend to sell winners to new investors, the new investors, not having experienced the gains, will not be subject to the house money effect. Loss aversion. Investors can be subject to loss aversion. If we spend $1, on a stock, there is an aversion to selling at a loss, but an incentive to sell at a small profit.

If investors frequently check their stocks, it can make them risk-averse and sell as soon as stocks move into profit. Behavioral Finance (Prospect Theory, Mental Accounting, Regret Aversion & Self Control) Sell the stock now and realize a loss of $10Sell the stock now and realize a loss of $10 OROR Hold the stock for one more period, with aHold the stock for one more period, with a odds between losing an additional $ odds between losing.

"Mental Accounting, Loss Aversion, and Individual Stock Returns," Journal of Finance, American Finance Association, vol.

56(4), pagesAugust. Nicholas Barberis & Ming Huang, "Mental Accounting, Loss Aversion, and Individual Stock Returns," NBER Working PapersNational Bureau of Economic Research, Inc. Mental Accounting, Loss Aversion, and Individual Stock Returns: Discussion. The Journal of Finance, Vol.

56, No. 4, (Aug., ), pp. Available from. Get this from a library. Mental accounting, loss aversion, and individual stock returns. [Nicholas Barberis; Ming Huang; National Bureau of Economic Research.] -- Abstract: We study equilibrium firm-level stock returns in two economies: one in which investors are loss averse over the fluctuations of their stock portfolio and another in which they are loss.

What is Loss Aversion. Loss aversion is a tendency in behavioral finance Behavioral Finance Behavioral finance is the study of the influence of psychology on the behavior of investors or financial practitioners.

It also includes the subsequent effects on the markets. It focuses on the fact that investors are not always rational where investors are so fearful of losses that they focus on trying. Mental Accounting Bias, Its influence on Behaviour and Approach of High Networth Individual (HNI) in Stock Investment in India Conference Paper (PDF Available) October with 1, Reads.

Myopic loss aversion gives rise to poor portfolio management and lower returns. It also may help explain the equity risk premium. Overconfidence. Being overconfident in your investing abilities can lead to big investing losses.

A main reason is that, in the short run, the ups and downs of the stock market are random happenings.Mental Accounting, Loss Aversion, and Individual Stock Returns 17 December | The Journal of Finance, Vol. 56, No.

4 The impact of business objectives and the time horizon of performance evaluation on pricing behavior.