If someone doesn’t sell a loser… Did we finally decide if it was Loss Aversion or Regret? I know I could search but its 9:20 on a Friday night and I just got in from work.
could be both depending how you look at it, but Loss Aversion is more plausible
Instructor Hours Question: B1, p281, question 5. I chose C (loss aversion) because Chen Wang was reluctant to sell bad stock and held it too long. There’s no sign of incorporation of new information or not. Is it correct? Answer: Yes, you are correct. That answer is based upon former Level 3 readings. The questions is now best answered as loss aversion. Thanks for pointing it out…I will see that it’s posted as an update!
Despite what the prof said, Schweser’s staff is insisting that the correct answer is “Anchoring”. And this was never posted as an update. Go figure. Schweser->"This is not loss aversion because we have no evidence there is an actual loss. All we know is that the GFTC stock has fallen 15% from a previous high and it could still be above the initial investment price thus there is not a loss yet. The only loss is in the investor’s perception of a loss from the previous high. This is anchoring as described on page 175 of book 1 under LOS 12.c in which it states in part “anchoring refers to the need to grab onto anything when faced with uncertainty”.
Ah, ok. If you’re not selling a losing stock because it means you would have to recognize a loss and give up the possibility that you were right and should have bought it, it’s Loss Aversion. If the stock has gone up and you don’t want to sell because you gave back some of the profit (but haven’t yet incurred a loss), then it might be Anchoring because you assume that the previous runup in price is what the “real performance” is, and you’re discounting the fact that it has come down subsequently as indicating anything important. It also suggests that Anchoring is the opposite of Recency bias. As long as you have both, it should balance out and you’ll be completely rational. 
I could also see hwo it would be Regret, b/c you dont want to regret selling it at $5 profit when it could have been a $20 profit…
Damn i dont remember ANYTHING from that section 
dude: wont sell a loser: loss aversion (b/c they have to admit they made a mistake) wont sell a winner: fear of regret (b/c the price may keep going up)
I agree that won’t sell a loser is most likely explained by loss aversion. But regret could also be used (b/c the price may go up after you sold it, and you experience a regret of making a mistake) Regret is the emotion experienced for not having made the right decision.
Which is the one where you won’t go back and buy something that’s now good because you got burned on it before, but if you were totally rational, you would see that it’s a good opportunity. I thought that was Regret.
That could be anchoring…
snake-bite effect
good call on that one CC…
bchadwick Wrote: ------------------------------------------------------- > Which is the one where you won’t go back and buy > something that’s now good because you got burned > on it before, but if you were totally rational, > you would see that it’s a good opportunity. I > thought that was Regret. This could be representatives, you got burned on something (lets say a certain stock)and you formed a stereotype that this stock is no good, in the future you make your decisions not based on rationality but based on this stereotype. People who rely on representativeness heuristic become overly pessimistic about past losers and overly optimistic about past winners, which sometimes causes past losers to be undervalued and past winners to be overvalued (aka winner-loser effect).
Could also be overconfidence, as you’re sure it will come back. Being sure of something is overconfidence