The CFAI spend a fair amount of time explaining how an individual would act having loss aversion bias. I have the impressio to have seen different possiblity of reactions when it comes to how behave an investor when having loss aversion bias.
Would soemone know how an investor having loss aversion bias would preferebly act in a losing position situation, would he just hold his losing positions waiting for recovery or would he become risk seeking in accumulating more shares in order to have more chance to recover ? Never thought if risk seeking means holding losing positions or taking more risk in accumulating more shares.
He might do nothing (holding losers too long); or might become a risk seeker ( buy more at the new low prices for the hope to cover some of his losses).
@JuniorCk8 / The question is more to understand if a loss averse person take more risk in buying more shares (becoming risk seeker) or if he only have a passive reaction in keeping his position. I personnaly think that both situation are correctly showing loss aversion, but wanted to have this clear on time for good.
@JuniorCk8 / I find the curriculum not clear about this point. Your take is totally correct, but some sentences in the curriculum are saying that the client is taking additional risk… which for me means taking bigger/additional positions.
I don t understand why it is not possible or wrong to inform ourself about a situation/concept that is not clear in our mind just because it could potentially make think that this makes reference to something or a specific question. Please let’s be a bit logic and consequent about what is right or wrong and let’s stop to get those kind of police alerts/attitude for something that is not worth at all. The only thing you are doing with your post is puting the finger on something that was not the center of the discussion… Don’t understand that.