Change, Loss and the “Endowment Effect”
Daniel Kahneman, widely considered to be the Father of Behavioral Finance, is the Eugene Higgins Professor of Psychology Emeritus and Professor of Psychology and Public Affairs Emeritus at Princeton University. In 2002, he received the Nobel Memorial Prize for economics and his work in behavioral economics has reshaped thinking around people’s views and behaviors as they relate to personal finances. Based on his research, Kahneman asserts that for most people, “change” is more significant than “losses” when it comes to wealth. And that they often demand much more to give up an object than they would be willing to pay to acquire it, including stocks in a portfolio. He calls this the “endowment effect.”
