Prospect theory may explain why investors with stock losses will step outside their risk profile in orderto recoup the losses.

Question

Quizplus · Accepted Answer

Prospect theory suggests that individuals value gains and losses differently, leading to decisions that can be inconsistent with their initial risk preferences. This can cause investors to take on riskier investments to recover from losses, stepping outside their usual risk profile.

Prospect Theory May Explain Why Investors with Stock Losses Will