Behavioural Finance

Sunk-Cost Fallacy

Definition

What is Sunk-Cost Fallacy?

Continuing an investment because of past money or effort that cannot be recovered.

Example in practice

An investor adds more capital solely because they have already lost heavily.

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The tendency to feel losses more strongly than equivalent gains.

The tendency to overestimate one's knowledge, forecasting ability, or control.

The tendency to seek or interpret information that supports an existing belief.

Incorporating environmental, social, and governance factors into investment analysis or ownership.

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