Rereading my last post, it doesn't make a great deal of sense even to me (i'd had a couple of pints). I'll have another go.
I think the point is that investors with MLA are unable (think retail investors without expertise) or unwilling (see, perhaps, pension funds subject to annual accounting valuations at corp bond rates) to see a long term investment decision as just that - long term. They focus on the short term too much. Conversely, the notes kind of imply that it is a behavioural bias to be loss averse when looking at short term investments in general when clearly it is just good investment sense i.e. think lifestyling for DC pensions.
If the investor can see a long term investment period as multiple connected short term bets (i.e. a multi period investment horizon) rather than viewing each short term bet in isolation then they will be less concerned with the intermediate values of the investment and will therefore be less risk averse,
I think that on this basis, the core reading isn't necessarily inconsistent with the research quoted, just a bit misleading.
Agree / disagree?
Furthermore, given that there is MLA at work, the size of the irrationally short period can also be influential in the sense that e.g. if pension accounting valuations were less frequent - say triennially, funds might adopt a more agressive investment strategy with the theoretical possibility (probability) of a more positive result overall.
Last edited by a moderator: Mar 10, 2007