Evidence on Dynamic Loss Aversion from Currency Portfolios
By Ken Froot, State Street Associates
Sep 1, 2011

By Kenneth Froot, John Arabadjis, Sonya Cates, and Stephen Lawrence.

Published in the Journal of Portfolio Management, Fall 2011.

Do institutional investors care about past losses? If so, how do they frame the past to inform subsequent decisions, and what causes panic trading? The ability of investors to compartmentalize their losses and remain rational on their current investment decisions is an axiom of classical theory.

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