RT Journal Article SR Electronic T1 Evidence on Dynamic Loss Aversion from Currency Portfolios JF The Journal of Portfolio Management FD Institutional Investor Journals SP 60 OP 68 DO 10.3905/jpm.2011.38.1.060 VO 38 IS 1 A1 Kenneth Froot A1 John Arabadjis A1 Sonya Cates A1 Stephen Lawrence YR 2011 UL https://pm-research.com/content/38/1/60.abstract AB Currency investors exhibit a tendency to cut risk by pairing both longs and shorts following losses and a weaker tendency to add risk following gains. By differentiating between position-level, portfolio-level, and aggregate cross portfolio losses in currency investments, the authors demonstrate that this dynamic loss aversion spans multiple frames of reference. Losses are not compartmentalized, but rather a loss in one currency may impact trading in another. The authors also show that while the impact of a loss on subsequent trading decisions does linger, the effect declines sharply after a losing position is closed.TOPICS: Portfolio construction, interest-rate and currency swaps, risk management