LOSS AVERSION · PAIN
Weight of a loss
A good day is forgotten in a day, a bad day stays for several
Scores on the four axes
The axis this page explains
Weight of a loss
how much more a loss is felt than a gain of the same size
Answer the questions and your scores on all four axes will appear here.
What it means
For you, a day you lost ₩300,000 and a day you made ₩300,000 are not events of the same size. The amount is the same, but the depth of the mark left behind differs, and that difference quietly pushes the next decision. This does not come from being bad at arithmetic. It is closer to a default setting observed in most people.
This tendency causes problems not at the moment of the loss but afterward. Because a locked-in loss feels unusually large, you keep choosing options that avoid locking it in. A sense forms that it is not really lost until you let go, and the longer that sense lasts, the further your judgment drifts from the numbers.
One thing worth noting: feeling losses heavily and disliking risk are different matters. People with strong loss aversion often take bigger risks once they are in a loss, which is why this axis is measured separately even for people with a high risk tolerance score.
How it shows up
- On red days you either never open the app or keep hold of it all day
- A larger loss not yet locked in feels easier than a smaller one that is
- You close out winning stocks quickly and keep losing stocks for a long time
What research has seen
In research in the line of Kahneman and Tversky’s prospect theory, losses are generally observed to weigh about twice as much as gains of the same size. The size of that ratio is not always constant, though. Some pointed out that it does not appear with small amounts, and others argued it is not loss aversion but simple inertia, the pull to leave things as they are. Later studies observed it again across five samples, and the debate continues. What is certain is the direction, not the ratio.
Adjusting the process rather than the temperament
- When looking at a stock in a loss, ask yourself whether you would get into it again today at this price if you held none of it. If the answer is no, you can tell whether you are holding it out of judgment or avoidance
- Take out the reasons you wrote down when you got in and check only whether they are still true. The reason, not the price, becomes the standard
- Look at percentages before amounts. What share of the account it is comes closer to its real size than a figure like ₩300,000
When not to trust this score
A high score on this axis does not mean you lose more money. People who feel losses heavily often avoid overreaching in the first place and end up less hurt. This score measures the tilt of a feeling, not an outcome.
This test measures answers you report yourself, not actual behavior. One thing research on psychological biases has pointed out again and again is that people expect themselves to act more calmly in such situations than they actually do. A low score does not mean the bias is absent.
Axis scores are relative values for comparing the axes with one another. If all four axes come out at 30, it may mean the biases are weak, or that you have not yet been in the situations the questions ask about.
Having a strong bias and losing money are different things. This test does not predict outcomes and gives no answer about what to trade.
More on Jupick
What the other three axes measure
This assessment is reference content that describes investor psychology. It is not a suggestion to trade any stock or product and not investment advice. Investment decisions and their responsibility rest with you.