Economics Loss Aversion Questions
Loss aversion impacts investment decision-making by causing individuals to place a higher value on avoiding losses than on potential gains. This bias leads to a tendency to take less risky investment decisions and hold onto losing investments for longer periods of time, in order to avoid the pain of realizing a loss. Loss aversion can result in suboptimal investment strategies, as individuals may miss out on potential gains by being overly cautious and not taking advantage of profitable opportunities.