Myopic loss aversion
Checking risky investments too often makes loss-averse people shun good long-run bets.
What it means
Myopic loss aversion combines loss aversion with narrow framing over time: investors who evaluate their portfolios frequently see more interim losses, and because losses loom larger than gains, they find risky-but-rewarding assets unattractive. The more often outcomes are tallied, the more often a volatile asset shows a loss in any given window, so frequent evaluators behave as if far more risk-averse than infrequent ones. The concept resolves the puzzle of why people hold so few stocks despite their historically high returns, and it predicts that lengthening the evaluation horizon raises willingness to bear risk. It is the leading behavioral explanation of the equity premium puzzle. Practically, it implies that nudging savers to look at long-horizon returns increases healthy risk-taking.
Examples
An investor who checks a volatile fund daily sells in a panic, while one who reviews it once a year — seeing mostly gains — happily holds it.
A pension provider that shows members a one-year return chart rather than yesterday's movement finds far fewer of them bolting into cash after a bad week.
A company judging a new product line on monthly figures kills it in month four. A rival reviewing the same line once a year sees the trend and keeps it alive.
First described in Benartzi & Thaler (1995).