Choiceology with Katy Milkman cover image

To Fight Another Day: With Guests Alex Imas & Mary Stockwell

Choiceology with Katy Milkman

CHAPTER

The Impact of Realizing Losses on Risk-Taking Behavior

This chapter examines the influence of realizing losses on individuals' risk-taking tendencies, exploring the distinction between realized losses and paper losses in investment decisions. Through empirical studies and research experiments, the speakers illustrate how the timing of loss realization affects risk preferences and decision-making. The discussion delves into prospect theory and the realization effect, shedding light on how individuals' reactions to losses shape their financial behavior.

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