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Review of Finance Advance Access published online on October 4, 2009
Review of Finance, doi:10.1093/rof/rfp019
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The Authors 2009. Published by Oxford University Press on behalf of the European Finance Association. All rights reserved. For Permissions, please email: journals.permissions@oxfordjournals.org

Myopic Investment Management*

Kristoffer W. Eriksen and Ola Kvaløy

University of Stavanger

Myopic loss aversion (MLA) has been proposed as an explanation for the equity premium puzzle, and experiments indicate that investors exhibit behavior consistent with MLA. But a caveat is that a large bulk of financial assets is managed by investment managers whose objectives may differ substantially from those of private investors. Most importantly they manage their clients' money, not their own. In this paper we test experimentally how individuals take risk with other people's ("clients") money. We find that subjects behave consistently with MLA over their clients' money and take less risk with their clients' money than with their own.

JEL Classification: C91, D81, G11

* We thank the Editor, three anomymous referees, and Øystein Gjerde, Jostein Lillestøl, Trond E. Olsen, Klaus Mohn, Ragnar Nymoen, Mari Rege, Matthias Sutter, Bernt Arne Ødegaard and participants at the FIBE conference in Bergen, the International Meeting of Experimental and Behavioral Economics in Alicante and the Nordic Conference on Behavioral and Experimental Economics in Copenhagen for useful comments, and Atle Øglend for excellent research assistance. Funding from the Norwegian Finance Market Fund is greatly appreciated.


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