Question

The tendency to hold onto losing stocks in the hope that they will recoup is called:_______

Answer 1

The tendency to hold onto losing stocks in the hope that they will recoup is called loss aversion.

Loss aversion is a cognitive bias that explains why the pain of loss has twice as much psychological impact as the joy of winning. Losing money or another valuable item can feel worse than gaining the same. This principle is prominent in the field of economics. What distinguishes loss aversion from risk aversion is that the utility of monetary rewards depends on what has been previously experienced or expected.

In the realm of behavioral choice, 'loss aversion' is a behavioral phenomenon in which individuals exhibit greater sensitivity to potential losses than gains. Conversely, “risk-averse” people have an increased sensitivity/aversion to options with uncertain outcomes.

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