YAhmed

I thought the answer was prospect theory, I don’t have the book so I can’t look up their justification. However, I still don’t see how this has to do with layering your portfolio. Also, Loss averse investors tend to hold on to losers longer than justified and sell winners earlier than justified AND hold riskier portfolios as a result. A loss averse person is not necessarily a risk averse person.
I will check the guideline answer on this when I have the book with me, but I think what I’ve said here is correct. Let me know if it is not.