A year ago you bought two stocks. You bought Sid Corp. for $40 per share and Ovie Enterprises for $5 per share. Today they are BOTH worth $20. If you suffer from loss aversion you might:

Question

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Loss aversion is the tendency to prefer avoiding losses over acquiring equivalent gains. In this scenario, because both the stocks have decreased in value to the same extent, selling both or holding both would result in the same loss. However, since you bought Sid Corp. at a higher price per share, the loss incurred on selling it would be higher, thus leading to more regret. Hence, the best choice for someone suffering from loss aversion would be to keep the shares of Sid Corp. and sell the shares of Ovie Enterprises, which would minimize the regret associated with the loss.

A Year Ago You Bought Two Stocks