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Wendy01

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tT
发表于 2011-7-13 15:30 | 只看该作者

Loss Aversion and Regret Minimization

about, holding, between, selling, difference
What is the main difference between the two?

I can see Loss Aversion is to avoid selling securities at a loss, or holding to losing positions for too long.

How about Regret Minimization (or, Fear of Regret)?
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Darien

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发表于 2011-7-13 15:30 | 只看该作者
from the practice examples:

loss aversion: your trade is underwater but you won't realize the loss (i.e. hold onto the trade, maybe cost averaging or simply starring)

fear of regreat: you made a bad trade in x and now you won't trade x anymore

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dyga

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发表于 2011-7-13 15:30 | 只看该作者
Loss aversion - hold onto losers (or add to losers)

fear of regret - hold onto winners too long - would hate to sell and then watch it keep ripping. Also hold onto losers too long - by selling you finally admit you made a bad choice. However at some point you will sell if you can blame it on something other than yourelf....particularly macro data like GDP or i rates.

Blame game is a way to reduce cognitive dissonance. Ties into defenses for bad forecasting. if-only, cet-parib, etc. All this stuff is so interconnected.

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