It challenges the traditional assumption of rational decision-making in economics by examining why and how people make irrational financial choices. that #FF11 Behavioral finance explores how psychology affects investor decisions.
The Power of Loss Aversion-
Did you know that people tend to fear losses more than they value gains?
This is known as loss aversion, a key concept in behavioral finance. Let’s dive into the numbers!
Studies show that losses are psychologically twice as powerful as gains.
Fact: A study by Nobel Prize winners Daniel Kahneman and Amos Tversky found that the pain of losing $100 is roughly equivalent to the joy of gaining $200.
Insight: This bias can lead to irrational financial decisions, like holding onto losing investments for too long or avoiding risky, yet potentially rewarding, opportunities.
Stay tuned with hashtag#financialfridays11 for more insights into your financial behavior.
How do you handle losses? Share your thoughts in the comments!
*Source: Kahneman, D., & Tversky, A. (1979). Prospect Theory: An Analysis of Decision under Risk. Econometrica.
Investment Decision Paralysis: Overcoming Fear for Financial Growth
Studies reveal that 60% of investors experience decision paralysis due to the overwhelming number of choices, leading to inaction. Decision paralysis can prevent you from
August 7, 2024
