![]() ![]() ![]() In other words, these investors avoided the negative effects of prospect theory. Plus they would not have experienced any of the volatility (and corresponding fear or greed) along the way. Investors who checked their investment results just one time, after 23 years, would see this very large gain. In reality, the S&P 500 appreciated by over 700% during this time period. The red dotted line is if they look at it daily. The dark blue dotted line is if they look at it weekly. The green dotted line is how an investor, according to prospect theory, will perceive the portfolio if they look at it monthly. However, since each person’s emotional experience changes depending on how often they observe this performance, we demonstrate the likely emotional experience in the dotted lines. ![]() It depicts a simple example of how an investor might experience prospect theory: The raw performance of the S&P 500 index is in solid blue. ![]()
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