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Efficiency Overpowers Efforts to Chase Losses

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finance
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Duquesne...

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documents in English
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school essay
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2 pages
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  1. Introduction
  2. The importance of focusing on the current value of investments
  3. Research referencing mental accounting and the investor's tendencies to feel the need to breakeven
  4. Understanding all of the potential problems with trying to chase losses
  5. Conclusion

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.

[...] For example, if a set investment strategy were put in place for the investors that kept them from making unconventional moves on the market. By following an investment strategy, an investor would have limits that might prevent them from investing in higher risk stocks. Another specific tactic that might prevent this type of behavior from occurring would be for employer's evaluating investors on specific trades. This might eliminate some of the fear of regret that was discussed above. In this way traders wouldn't be trying to chase there losses because every trade would [...]


[...] Efficiency Overpowers Efforts to Chase Losses The aim of this paper is to discuss Dr. Ryan Garvey's studies 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. [...]

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