Table VII. Open in new tab Diminishing...

	Subjective rating of expected return	Subjective rating of past return
Expected or past portfolio return	5.388	4.794	5.076	6.679	4.802	4.843
(if $< - 5 %$ ⁠)	(5.62)***	(5.28)***	(4.41)***	(14.93)***	(10.54)***	(9.62)***
Expected or past portfolio return	19.652	19.546	19.910	18.300	10.243	9.020
(if $\geq - 5 %$ and < 0)	(6.49)***	(6.51)***	(5.89)***	(7.15)***	(4.53)***	(3.65)***
Expected or past portfolio return	7.066	5.616	5.336	12.005	8.014	8.642
(if > 0 and $\leq 5 %$ ⁠)	(5.12)***	(4.15)***	(3.67)***	(5.77)***	(3.62)***	(3.68)***
Expected or past portfolio return	2.761	2.575	2.624	5.567	4.239	4.688
(if $> 5 %$ ⁠)	(5.87)***	(5.76)***	(5.31)***	(8.03)***	(6.44)***	(5.97)***
R²	0.192	0.231	0.247	0.469	0.520	0.533
Observations	2107	2107	1866	2115	2115	1864
Set of controls	No	No	Yes	No	No	Yes
Time-fixed effects	No	Yes	Yes	No	Yes	Yes
Individual-fixed effects	Yes	Yes	Yes	Yes	Yes	Yes

Loss aversion coefficient λ for	2.78	3.48	3.73	1.52	1.28	1.04
returns close to reference point	(0.77)	(1.09)	(1.32)	(0.40)	(0.50)	(0.44)
p-value Wald test (λ = 1)	<0.001	<0.001	<0.001	0.105	0.524	0.919

Subjective rating of expected return

Subjective rating of past return

(1)

(2)

(3)

(4)

(5)

(6)

Expected or past portfolio return

5.388

4.794

5.076

6.679

4.802

4.843

(if

< - 5 %

⁠)

(5.62)***

(5.28)***

(4.41)***

(14.93)***

(10.54)***

(9.62)***

Expected or past portfolio return

19.652

19.546

19.910

18.300

10.243

9.020

(if

\geq - 5 %

and < 0)

(6.49)***

(6.51)***

(5.89)***

(7.15)***

(4.53)***

(3.65)***

Expected or past portfolio return

7.066

5.616

5.336

12.005

8.014

8.642

(if > 0 and

\leq 5 %

⁠)

(5.12)***

(4.15)***

(3.67)***

(5.77)***

(3.62)***

(3.68)***

Expected or past portfolio return

2.761

2.575

2.624

5.567

4.239

4.688

(if

> 5 %

⁠)

(5.87)***

(5.76)***

(5.31)***

(8.03)***

(6.44)***

(5.97)***

R²

0.192

0.231

0.247

0.469

0.520

0.533

Observations

2107

1866

2115

1864

Set of controls

Yes

Time-fixed effects

Yes

Individual-fixed effects

Yes

Loss aversion coefficient λ for

2.78

3.48

3.73

1.52

1.28

1.04

returns close to reference point

(0.77)

(1.09)

(1.32)

(0.40)

(0.50)

(0.44)

p-value Wald test (λ = 1)

<0.001

0.105

0.524

0.919

	Subjective rating of expected return	Subjective rating of past return
Expected or past portfolio return	5.388	4.794	5.076	6.679	4.802	4.843
(if $< - 5 %$ ⁠)	(5.62)***	(5.28)***	(4.41)***	(14.93)***	(10.54)***	(9.62)***
Expected or past portfolio return	19.652	19.546	19.910	18.300	10.243	9.020
(if $\geq - 5 %$ and < 0)	(6.49)***	(6.51)***	(5.89)***	(7.15)***	(4.53)***	(3.65)***
Expected or past portfolio return	7.066	5.616	5.336	12.005	8.014	8.642
(if > 0 and $\leq 5 %$ ⁠)	(5.12)***	(4.15)***	(3.67)***	(5.77)***	(3.62)***	(3.68)***
Expected or past portfolio return	2.761	2.575	2.624	5.567	4.239	4.688
(if $> 5 %$ ⁠)	(5.87)***	(5.76)***	(5.31)***	(8.03)***	(6.44)***	(5.97)***
R²	0.192	0.231	0.247	0.469	0.520	0.533
Observations	2107	2107	1866	2115	2115	1864
Set of controls	No	No	Yes	No	No	Yes
Time-fixed effects	No	Yes	Yes	No	Yes	Yes
Individual-fixed effects	Yes	Yes	Yes	Yes	Yes	Yes

Loss aversion coefficient λ for	2.78	3.48	3.73	1.52	1.28	1.04
returns close to reference point	(0.77)	(1.09)	(1.32)	(0.40)	(0.50)	(0.44)
p-value Wald test (λ = 1)	<0.001	<0.001	<0.001	0.105	0.524	0.919

Table VII.

Open in new tab

Diminishing sensitivity

The table shows results of panel fixed-effects regressions with subjective ratings of portfolio return as the dependent variable (Columns (1)–(3) for expected portfolio returns and Columns (4)–(6) for past portfolio returns). Independent variable is either numerical expected portfolio return (Columns (1)–(3)) or numerical past perceived portfolio return (Columns (4)–(6)). Both numerical return variables are split up in four intervals (⁠ $< - 5 %$ ⁠; $\geq - 5 %$ and < 0; > 0 and $\leq 5 %$ ⁠; $> 5 %$ ⁠). The set of control variables is the same as before. Coefficients are significant at *p ˂ 0.10, **p ˂ 0.05, ***p ˂ 0.01; t-values are shown in parentheses. The loss aversion coefficient is the ratio between the coefficients for portfolio losses and gains for the return intervals close to the reference point (standard errors in parentheses). The Wald test tests for equality of these coefficients (λ = 1).

	Subjective rating of expected return			Subjective rating of past return
	(1)	(2)	(3)	(4)	(5)	(6)
Expected or past portfolio return	5.388	4.794	5.076	6.679	4.802	4.843
(if $< - 5 %$ ⁠)	(5.62)***	(5.28)***	(4.41)***	(14.93)***	(10.54)***	(9.62)***
Expected or past portfolio return	19.652	19.546	19.910	18.300	10.243	9.020
(if $\geq - 5 %$ and < 0)	(6.49)***	(6.51)***	(5.89)***	(7.15)***	(4.53)***	(3.65)***
Expected or past portfolio return	7.066	5.616	5.336	12.005	8.014	8.642
(if > 0 and $\leq 5 %$ ⁠)	(5.12)***	(4.15)***	(3.67)***	(5.77)***	(3.62)***	(3.68)***
Expected or past portfolio return	2.761	2.575	2.624	5.567	4.239	4.688
(if $> 5 %$ ⁠)	(5.87)***	(5.76)***	(5.31)***	(8.03)***	(6.44)***	(5.97)***
R²	0.192	0.231	0.247	0.469	0.520	0.533
Observations	2107	2107	1866	2115	2115	1864
Set of controls	No	No	Yes	No	No	Yes
Time-fixed effects	No	Yes	Yes	No	Yes	Yes
Individual-fixed effects	Yes	Yes	Yes	Yes	Yes	Yes

Loss aversion coefficient λ for	2.78	3.48	3.73	1.52	1.28	1.04
returns close to reference point	(0.77)	(1.09)	(1.32)	(0.40)	(0.50)	(0.44)
p-value Wald test (λ = 1)	<0.001	<0.001	<0.001	0.105	0.524	0.919

	Subjective rating of expected return			Subjective rating of past return
	(1)	(2)	(3)	(4)	(5)	(6)
Expected or past portfolio return	5.388	4.794	5.076	6.679	4.802	4.843
(if $< - 5 %$ ⁠)	(5.62)***	(5.28)***	(4.41)***	(14.93)***	(10.54)***	(9.62)***
Expected or past portfolio return	19.652	19.546	19.910	18.300	10.243	9.020
(if $\geq - 5 %$ and < 0)	(6.49)***	(6.51)***	(5.89)***	(7.15)***	(4.53)***	(3.65)***
Expected or past portfolio return	7.066	5.616	5.336	12.005	8.014	8.642
(if > 0 and $\leq 5 %$ ⁠)	(5.12)***	(4.15)***	(3.67)***	(5.77)***	(3.62)***	(3.68)***
Expected or past portfolio return	2.761	2.575	2.624	5.567	4.239	4.688
(if $> 5 %$ ⁠)	(5.87)***	(5.76)***	(5.31)***	(8.03)***	(6.44)***	(5.97)***
R²	0.192	0.231	0.247	0.469	0.520	0.533
Observations	2107	2107	1866	2115	2115	1864
Set of controls	No	No	Yes	No	No	Yes
Time-fixed effects	No	Yes	Yes	No	Yes	Yes
Individual-fixed effects	Yes	Yes	Yes	Yes	Yes	Yes

Loss aversion coefficient λ for	2.78	3.48	3.73	1.52	1.28	1.04
returns close to reference point	(0.77)	(1.09)	(1.32)	(0.40)	(0.50)	(0.44)
p-value Wald test (λ = 1)	<0.001	<0.001	<0.001	0.105	0.524	0.919

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