The sad truth is most investors suffer from "loss aversion"--they don't sell loser stocks when they should.
The lure of some tax savings can act as a prod to help you overcome loss aversion.
The results are always very biased toward flipping, and that says something about the human tendency toward loss aversion.
They realize for the first time the innate nature of loss aversion.
We tend to use irrational guidelines such as perceived fairness and loss aversion, which are based on emotions, attitudes and memories, not logic.
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The basic principle at work here is loss aversion: the idea that losing something has a stronger emotional impact than gaining something of the same value.
These investors recognize the point when loss aversion has kicked in, making them want to hang on for the chance that a souring investment will improve.
Instead of worrying about loss aversion and raising more than you need, greed-induced overcapitalization is often driven wanting bigger warchests in the face of lots of interest.
In the end, mature investors are those who have a rational and an emotional understanding of the concept of loss aversion and its potential to affect our investment decisions.
Since negative returns are at play, a loss aversion mechanism kicks in, and people will actually go double or nothing in order to keep from losing thereby taking more risk.
Kahneman, often working with a fellow academic, the late Amos Tversky, described many of the core concepts of behavioral finance, including: loss and regret aversion, representativeness, anchoring and adjustment, and availability bias.
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