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I don't find the listed examples convincing. Especially: > And people are not particularly likely to sell a stock they believe has even odds of going up or dow

by lolc 8y ago

I don't find the listed examples convincing. Especially: > And people are not particularly likely to sell a stock they believe has even odds of going up or down in price (in fact, in one study I performed, over 80 percent of participants said they would hold on to it). How naïve is that? We're not interested in what people said they would do. We want to know what they did!

Cacti 8y ago
Have you paid attention to either of the past US market busts, in 2000-2001 and 2008? People overwhelmingly ride it into the ground because of two things: - The fear of realizing a loss - The unrealistic expectation of upside Also, you'd be hard pressed to find a stock IRL that you could predict in advance as "50/50" and see what participants do, wouldn't you?
- gbear605 8y ago
  It seems like it would be fairly simple to design an stock market simulation (with real money payouts) to test this.
  - Cacti 8y ago
    Either way it is not realistic. People losing a few cents on what they know is a simulation is far, far different than people watching their life savings evaporate in an uncertain environment. Besides, the point of that particular study isn't a stock, it's that they have a 50-50 chance of losing money they were just given. The stock is just a placeholder for anything.
hn_throwaway_99 8y ago
I not only don't find his examples particularly convincing, but in many cases I don't even think they are really examples of loss aversion to begin with. I've always interpreted loss aversion as "It's worse to lose something you've already attained than to miss out on something you never had in the first place." His example of "Messages that frame an appeal in terms of a loss (eg, “you will lose out by not buying our product”) are no more persuasive than messages that frame an appeal in terms of a gain (eg, “you will gain by buying our product”)" is extremely weak IMO. In both cases the consumer never had the product to begin with. The author is trying to argue FOMO is the same thing as loss aversion, which on the contrary, FOMO is really greed.

by lolc 8y ago

Cacti 8y ago

Have you paid attention to either of the past US market busts, in 2000-2001 and 2008? People overwhelmingly ride it into the ground because of two things: - The fear of realizing a loss - The unrealistic expectation of upside Also, you'd be hard pressed to find a stock IRL that you could predict in advance as "50/50" and see what participants do, wouldn't you?

gbear605 8y ago
It seems like it would be fairly simple to design an stock market simulation (with real money payouts) to test this.
- Cacti 8y ago
  Either way it is not realistic. People losing a few cents on what they know is a simulation is far, far different than people watching their life savings evaporate in an uncertain environment. Besides, the point of that particular study isn't a stock, it's that they have a 50-50 chance of losing money they were just given. The stock is just a placeholder for anything.

hn_throwaway_99 8y ago

I not only don't find his examples particularly convincing, but in many cases I don't even think they are really examples of loss aversion to begin with. I've always interpreted loss aversion as "It's worse to lose something you've already attained than to miss out on something you never had in the first place." His example of "Messages that frame an appeal in terms of a loss (eg, “you will lose out by not buying our product”) are no more persuasive than messages that frame an appeal in terms of a gain (eg, “you will gain by buying our product”)" is extremely weak IMO. In both cases the consumer never had the product to begin with. The author is trying to argue FOMO is the same thing as loss aversion, which on the contrary, FOMO is really greed.