Losing Days

lol

 

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This thread reminded me of this...

Losses Hurt More Than Wins
Losses Hurt Worse Than Wins Give Pleasure: A Behavioral Economics Perspective Loss aversion is a well-documented cognitive bias in behavioral economics, suggesting that individuals experience more pain from losses than pleasure from equivalent gains. This phenomenon has been extensively researched and observed in various domains, including finance, psychology, and decision-making.

Theoretical Foundations
Prospect theory, developed by Daniel Kahneman and Amos Tversky, provides a framework for understanding loss aversion. According to prospect theory, individuals evaluate outcomes relative to a reference point, rather than in absolute terms. This means that losses are perceived as more severe than equivalent gains, leading to a greater emotional impact.

Empirical Evidence
Numerous studies have consistently demonstrated the prevalence of loss aversion. For example:

1. In a study by Tversky and Kahneman (1979), participants were asked to choose between a sure gain of $1,400 and a 66% chance of gaining $1,500, with a 33% chance of gaining nothing. Most participants opted for the sure gain, indicating a preference for avoiding loss over seeking gain.
2. Research by Kahneman and Tversky (2000) found that people tend to overvalue things they own (the endowment effect), which can be attributed to loss aversion. When faced with the possibility of losing something, individuals become more risk-averse and prefer to avoid losses rather than seeking gains.
3. A study by Gal and Rucker (2018) reviewed the literature on loss aversion and found that it is a robust phenomenon, observed across various domains, including finance, psychology, and decision-making.

Implications
Loss aversion has significant implications for decision-making, particularly in financial contexts. It can lead to:

1. Conservative investment strategies: Investors may avoid taking risks or selling assets at a loss, even if it means missing out on potential gains.
2. Overemphasis on avoiding losses: The focus on avoiding losses can lead to a neglect of opportunities for gains.
3. Inefficient market behavior: Loss aversion can contribute to market inefficiencies, as investors make decisions based on emotional responses to losses rather than rational analysis of market fundamentals.

Conclusion
Losses hurt worse than wins give pleasure, and this phenomenon has significant implications for decision-making, particularly in financial contexts. Understanding loss aversion can help individuals and investors make more informed, rational decisions by acknowledging the emotional biases that influence their choices.

 

Unbelievably consistent pnl.

 

Yeah, almost too consistent to be true.

@Baron should kill these fraud threads.

 

I think it's a good approach..appreciated man!

 

Thanks. If you want to join and talk about your losing days you are welcome to do so!

 

Thanks for your contribution, I think overemphasis on avoiding losses was in great part responsible for my poor past results.

 

Seriously? a 1 million drawdown isn’t a big deal, my tips in 230 are usually higher

 

I didn't even beat the index today, trailing by .2%. Too afraid to plunge at the bottom of yet another V. Went in way too small!