The Rational View podcast with Dr. Al Scott cover image

Rationality requires managing your cognitive biases

The Rational View podcast with Dr. Al Scott

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Why You Shouldn't Buy Insurance

Loss aversion bias is a tendency for people to avoid losses while more strongly than achieving gains. People feel pain from losses much more acutely than they feel pleasure from gains of the same size. Loss aversion causes people to make bad financial decisions. It also makes people sell their stocks on a loss and miss the bounce back. For example if the stock market crashes people sell low and buy high rather than holding on and getting the bounce back - you end up have fewer losses that way.

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