Barry Ritholtz, Columnist

A Challenge to the Biggest Idea in Behavioral Finance

Two professors make an interesting argument, but the theory of loss aversion isn’t dead yet.

August 9, 2018 at 1:00 PM UTC

Barry Ritholtz is a former Bloomberg Opinion columnist. He is chairman and chief investment officer of Ritholtz Wealth Management, and was previously chief market strategist at Maxim Group. He is the author of “Bailout Nation.”

That sure hurt.
Photographer: Thierry Esch/Paris Match Archive/Getty Images

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A recent paper summarized in Scientific American raises an intriguing question: Is one of the founding theories of behavioral finance known as loss aversion -- the idea that people place more weight on avoiding losses than gains -- correct?

In the magazine, one of the study's authors, David Gal of the University of Illinois - Chicago, writes: