Efficiency Overpowers Efforts to Chase Losses
Summary :
Table of Contents
- Introduction
- The importance of focusing on the current value of investments
- Research referencing mental accounting and the investor's tendencies to feel the need to breakeven
- Understanding all of the potential problems with trying to chase losses
- Conclusion
Abstract
The aim of this paper is to discuss Dr. Ryan Garvey's studies "Do losses Linger? Evidence from proprietary stock trading," while examining how this works inline with the Efficient Market Hypothesis. Through the research provided by Dr Garvey, it is expressed that professional traders are likely to take more risk to make up for their losses throughout a given day. Efficient markets provide proof that investors are not going to outperform their losses and breakeven for that day. This paper is written under the assumptions of the Efficient Market Hypothesis.
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