So we sell what has risen too early and hold what has fallen too long.
Losses hurt twice as much.
The same money for 10 years. You choose how often to look. The other looks once a year.
Look less, hurt less. The money does not change; how often you see red does.
← Red LinesRed Line 38 of 48 The idea The coin toss In your money Where it bends This game’s numbersHow strong the proof isBGood proof, with limits Where it comes from
Losing €100 feels worse than gaining €100 feels good: about twice as bad. That one feeling bends many money decisions.
Offered a fair toss, lose €100 on tails, most people say no unless heads pays about €200. A fair bet isn’t enough: the gain must be double.
So we sell what has risen quickly, to lock in the joy, and hold a loser, to avoid feeling the loss. It is often the wrong way round.
The size of the pain varies by person. Know your own.
Up and down days of the S&P 500 since 1928, Asset DedicationS&P 500 yearly returns, Aswath Damodaran, NYU SternAdvances in Prospect Theory, Tversky and Kahneman, Journal of Risk and Uncertainty (1992)
A large review puts the average near two, and investors do sell what has risen and keep what has fallen, but the size changes a lot by person and setting.
- Meta-analysis of Empirical Estimates of Loss Aversion Alexander L. Brown, Taisuke Imai, Ferdinand M. Vieider & Colin F. Camerer, Journal of Economic Literature 62(2), 485-516, 2024
- Are Investors Reluctant to Realize Their Losses? Terrance Odean, The Journal of Finance 53(5), 1775-1798, 1998
- The Loss of Loss Aversion: Will It Loom Larger Than Its Gain? David Gal & Derek D. Rucker, Journal of Consumer Psychology 28(3), 497-516, 2018
Checked 2 Nov 2026 · How we grade
- A Strong proof: Many good studies or long official data, from different teams or countries, point the same way.
- B Good proof, with limits: Solid studies agree on the direction, but the size varies, or the data covers few places or few kinds of people.
- C Mixed proof: Some good studies for, some against, or the evidence covers only part of the line.
- D Thin proof: Mostly one book’s argument, one survey or stories. It may be wise, but it has not been tested well.
- = True by the sums: It follows from arithmetic, so no study can overturn it. We still show what real data says.
Daniel Kahneman & Amos Tversky, “Prospect Theory: An Analysis of Decision under Risk”, Econometrica (1979). In our words, not quoted.
See it in numbers: Loss aversion (From Zero)
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