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Evidence on Dynamic Loss Aversion from Currency Portfolios

By Ken Froot, State Street Associates

Dec 31, 2018

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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1.Peter L. Bernstein Award for Best Article in an Institutional Investor Journal in 2013; Doriot Award for Best Private Equity Research Paper in 2022; Bernstein-Fabozzi/Jacobs-Levy Award for Outstanding Article in the Journal of Portfolio Management in 2006, 2009, 2011, 2013 (2), 2014, 2015, 2016, 2021; Roger F. Murray First Prize for Research Presented at the Q Group Conference in 2012 and 2021; Graham & Dodd Scroll Award for article in the Financial Analysts Journal in 2002 and 2010.