Loss aversion makes losses feel twice as bad

Daniel Kahneman and Amos Tversky introduced loss aversion in a 1979 paper stating losses feel roughly twice as bad as equal gains. A large 2024 meta-analysis by Brown found the mean multiplier is about 1.955 instead of the familiar 2.25. The disposition effect causes investors to sell winners early while holding losers too long to avoid realizing a loss on paper.