A Review of the Relationship Between Loss Aversion Bias and Investment Decision-making Process

Abstract

The decision-making process determines that investors tend to be not rational to make substantial investment decisions when it possesses the possibility of great loss. This phenomenon can be explained by the loss aversion bias, which indicated that people have stronger feelings and biases when they are taking losses than gaining profits. However, it is also pointed out by other scholars that many other factors could influence the result of the bias, and rationality cannot be easily predicted. Therefore, by conducting survey analysis, it is then concluded in this paper that the loss aversion bias is significant in investors, and multiple factors could affect the degree of loss aversion for individual investors, they are age, gender, and the ability to take the risks.