Loss aversion:
According to empirical evidence, the pain
of losing $100 is felt more than twice as
much as the pleasure of gaining the same
amount (Kahneman and Tversky, 1992).
Sadly, this irrational approach is evident
in the stockmarket. Many investors keep
hanging on to losing stocks in the hope
that, some day, somehow, they will bounce
back. Such is the distaste for loss that it
causes a mental freeze which renders
people incapable of sound judgement.
Loss aversion is a common condition.
Think about it – facing a loss, do you
sometimes freeze and refuse to
acknowledge reality?