Knowledge Tree
Relations (1)
related 2.32 — strongly supporting 4 facts
Loss aversion is a behavioral bias that directly impacts the decision-making process of an investor, as evidenced by their tendency to hold underperforming stocks [1], [2] and their reluctance to realize losses [3]. Furthermore, behavioral economics provides frameworks for investors to mitigate the negative effects of this specific bias [4].
Facts (4)
Sources
The Role of Behavioral Economics in Investment Decision-Making online.utpb.edu 1 fact
claimLoss aversion occurs when an investor keeps an investment of low value for longer than is prudent because they fear missing an opportunity for the investment to grow, which ironically prevents them from mitigating losses.
Mind Over Money: Behavioral Economics and Financial Decision ... linkedin.com 1 fact
claimBehavioral economics helps investors understand and address common pitfalls like herd behavior or loss aversion, which can lead to more rational strategies and better investment outcomes.
The Impact of Cognitive Biases on Professionals' Decision-Making frontiersin.org 1 fact
claimIn a 1998 study published in the Journal of Finance, Terrance Odean found that investors are reluctant to realize their 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.