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Blog #28 Loss Aversion
By Managing Your Money  •  October 23, 2017
I don’t know if Daniel Kahneman (Princeton economist, Nobel laureate 2002) has ever been to Singapore. If he did, he would probably find a lot of similarity between Singaporeans’ kiasu attitude (afraid of losing) and the concept of loss-aversion that he pioneered and made famous. You are loss-averse if you hate losses so much that you either avoid it or deflect the pain of a loss irrationally. This implies that there are two main groups of loss-averse investors which I will call avoiders and deflectors. An avoider is someone who avoids riskier assets like stocks, preferring the safety of cash or government bonds  A deflector does invest in riskier assets but tends to: (a) sell a winning stock too early and (b) hangs on to a losing stock for too long. The deflector is  loss-averse because by selling soon after a win, he wants to avoid the regret of not selling ......
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By Managing Your Money
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