Question
An investor purchased a stock last year for $30 per share. The stock increased in value to $33 per share before declining to its current value of $27. The investor wants to sell the stock, but only if he can receive $30 per share or better. This behavior best illustrates which one of the following characteristics?
Multiple Choice
Loss aversion
Representativeness heuristic
Randomness
Myopic loss aversion
House money
Multiple Choice
Loss aversion
Representativeness heuristic
Randomness
Myopic loss aversion
House money
Answers
GPT-4o mini
The behavior described best illustrates **myopic loss aversion**.
Myopic loss aversion is the tendency for individuals to focus on potential losses in the short term rather than on potential gains, leading them to hold onto losing investments longer than they should. In this case, the investor is reluctant to sell the stock at a price below their purchase price of $30, despite the stock's current value being lower, indicating a strong aversion to realizing a loss.
So, the correct answer is **Myopic loss aversion**.
Myopic loss aversion is the tendency for individuals to focus on potential losses in the short term rather than on potential gains, leading them to hold onto losing investments longer than they should. In this case, the investor is reluctant to sell the stock at a price below their purchase price of $30, despite the stock's current value being lower, indicating a strong aversion to realizing a loss.
So, the correct answer is **Myopic loss aversion**.