Through the Lens: Myopic Financial Decisions

Ageing populations challenge current state retirement systems and increase the importance of individual long-term savings accumulation. Yet, despite offering greater access to personal finance tools, technological advancements often reinforce short-term investment perspectives. Three studies in this dissertation elucidate the individual consequences of short-sighted, or myopic,  investment behavior and perceptions through decision experiments mimicking real-world scenarios. The first study highlights the relevance of myopic loss aversion, showing how it curtails financial risk-taking in various settings. The second study connects the presentation of short-term asset prices to increased trading activity and reduced portfolio performance. Finally, the third study reveals how individuals’ biased perceptions of long-run risk on financial markets inhibit their participation in these markets. Collectively, these results call for policy initiatives enhancing the transparency and emphasis on long-term risk and return communication of financial assets, aiming to bolster the long-term financial security of households.