Question on Behaviorial Finance

What is the related behavioral finance concept of the statement: “I do not want to sell any bond in my portfolio for a lower price than I paid for the bond”? The answer is “regret” according to Schweser and “Reference point” according to CFA Institute. But shouldn’t it be loss-aversion?

Regret could almost be applied to any situation. I question whether it’s the best of the three you provided. “Reference point” doesn’t appear in the index nor could I find it in my skim thorugh readings 7-10. Where’d you see it? I agree with “loss aversion”. See LOS 8.a.

Thanks. This is actually one of the questions in 2004 exam. Reference point is no longer in this year’s LOS. Could it because “Loss-Aversion” is not a behavioral finance concept?

The term Schweser uses to describe the obsession with at least breaking even is “Evenitis.” If asked to identify the phenomenon in an essay question, call it that, or, the Trying-to-break-even effect. This is copied from the 2006 essay question 1D: D. Determine which one action taken by Serra best illustrates each of the following psychological biases: i. Snake-bite effect ii. House-money effect iii. Trying-to-break-even effect The label you apply (loss aversion or fear of regret) may not matter, so long as you identify that a biased decision took place.

I have not seen the " Trying-to-break-even effect" or the “Snake-bite effect” in the CFAI readings.

mo34 Wrote: ------------------------------------------------------- > I have not seen the " Trying-to-break-even effect" > or the “Snake-bite effect” in the CFAI readings. You may not have seen the terms, but you’ve read about the phenomena. Snake-Bike effect falls under recallability.