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Risk Aversion VS Loss Aversion

October 19, 2017

Risk Aversion: Investor values gains and losses equally. Will choose certain gains over uncertainty. For equal expected returns will choose less risky option.

Loss Aversion: The investor values losses higher than gains. In the event of a loss an investor may take on additional risk to reverse the loss, doubling down. Wealth level matter more than investment valuation and biased expectations possible.

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From → Economics

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  1. The Disposition Effect | CFA® Flashcards

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