LOSS AVERSION: THE UNSEEN FORCE SHAPING INVESTMENT DECISIONS
Artina KAMBERI, Shenaj HAXHIMUSTAFA
Abstract
This research paper aims to investigate the profound impact of loss aversion on individual investment decision-making, with a specific focus on its influence on risk preferences. Loss aversion, a key concept in behavioral economics, posits that individuals experience a greater psychological impact from losses than equivalent gains, thereby shaping their decision-making processes. The study employs an empirical approach, utilizing a diverse sample of individual investors to analyze how loss aversion interacts with risk preferences and influences investment choices. The research methodology involves a combination of surveys and data analysis to explore the intricate relationship between loss aversion and risk preferences. By examining real-world investment decisions in various market conditions, the study seeks to identify patterns and behavioral tendencies that emerge when individuals confront potential losses in their investment portfolios. The research design also considers demographic factors, financial literacy, and other relevant variables to provide a comprehensive understanding of the factors influencing investment choices. Ultimately, this study aims to enhance our comprehension of the psychological factors driving individual investment decisions and to inform the development of strategies that mitigate the negative impacts of loss aversion on financial outcomes.
Pages:
33 - 41