FYI: It has long been known that investors have asymmetric preferences when it comes to bearing downside risk versus participating in the upside.
The term “loss aversion” refers to an investor’s tendency to prefer avoiding losses more strongly than acquiring gains. Most studies suggest a loss is twice as powerful, psychologically, as an equal-sized gain. This aversion helps explain why the equity risk premium has been so large; the risk of owning equities is highly correlated with the risks of the economic cycle.
Thus, in recessions, investors who earn wages or own businesses are exposed to the double whammy of bear markets and either job layoffs or reduced business income (or even bankruptcy).
Regards,
Ted
http://www.etf.com/sections/index-investor-corner/swedroe-embracing-downside?nopaging=1
