Loss aversion

Loss aversion (English: loss aversion ) referred to in psychology and economics tends to be weighted higher losses than gains. For example, annoys you about the loss of 100 € more than one is pleased with the profit of 100 €. The discovery of the phenomenon goes back to Kahneman and Tversky (1979).

Loss aversion can be measured by using of experiments, about the question: What is the lowest income, I need to compensate for the 50 percent probability of a loss of $ 100? For many people the answer is approximately $ 200. The degree of loss aversion, loss aversion rate, in this case at 2.0. In several experiments conducted, the average loss aversion rate was between 1.5 and 2.5. Equity Trading Loss aversion is one of the most important behavioral patterns of investors.