Earlier this week, we examined a pair of studies that sought to explore the relationship between the equity premium puzzle and investor behavior, specifically a behavior known as myopic loss aversion (MLA). MLA describes the tendency of investors who are loss-averse to evaluate their portfolios too frequently, thus causing them to take a short-term view of investing. That, in turn, leads to a focus on the short-term volatility of the market and, as a result, they invest too little in risky assets.
Today we’ll look at some evidence from the academic literature that illustrates how MLA can be impacted by the frequency with which an investor evaluates his or her portfolio, as well as its implication for investors and some other possible explanations for the equity premium puzzle.
Read the rest of the article on ETF.com.
