Loss aversion
Risk & psychologyThe finding that losses are felt roughly twice as intensely as equivalent gains.
In plain terms
Why "I will sell when it returns to my buy price" is such a costly sentence.
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Glossary
Every term is defined twice: once the way a filing would put it, and once the way somebody would explain it to you across a table. The second one is usually the one that sticks.
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Myopic loss aversion
Risk & psychologyThe tendency to hold less of a volatile asset than a long horizon warrants, because the asset is being evaluated over intervals far shorter than that horizon.
In plain terms
Not weakness. Expected return accumulates with time while the scatter grows only with its square root, so at a daily interval nearly half of all observations are losses — and acting on a series like that is a reasonable response to the series.
Stress response
Risk & psychologyThe physiological reaction to acute stress, which narrows attention, strengthens loss aversion and shortens the felt time horizon.
In plain terms
The horizon that was ten years becomes ten days. It is why stopping for the day after a significant loss is protection rather than punishment.