Knowledge Tree
Relations (1)
related 2.00 — strongly supporting 3 facts
Loss aversion influences investor behavior regarding stocks, as it leads individuals to irrationally hold onto underperforming assets to avoid realizing losses [1], [2]. This behavioral bias is specifically linked to the disposition effect, where investors retain losing stocks while selling winning ones [3].
Facts (3)
Sources
The Psychology Behind Financial Choices: The Role of Cognitive ... tutoring.hsa.net 1 fact
claimLoss aversion can lead to poor investment decisions, such as holding onto stocks that are losing value or avoiding lucrative investments due to the fear of potential losses.
The Influence of Behavioral Biases on Investment Decisions jmsr-online.com 1 fact
claimLoss aversion, a concept consistent with prospect theory, causes investors to experience losses more intensely than gains, which leads to the irrational holding of underperforming stocks.
Biases in Behavioral Finance - World Scholars Review worldscholarsreview.org 1 fact
claimDuxbury et al. (2015) claimed that the house money effect coexists with the disposition effect, a variant of loss aversion where investors hold onto losing stocks and sell winning ones.