Aggregation EffectOpen Access

Aggregation Effect

Negative experiences feel less painful overall when they’re bundled together

We have an increasing numbness to losses as they mount, so instead of spreading out small pains over time, overall we feel better when they’re consolidated.

Lim (2006). Do investors integrate losses and segregate gains? Mental accounting and investor trading decisions. The Journal of Business.

The study

Setup

425,744 sales of US shares were analyzed by determining which had gained value and which had lost value. Both groups were further analyzed to determine whether the shares were sold in groups or on their own.

Results

The research found that investors were more likely to sell off losing trades in groups over those which were doing well, so as to ease the pain of loss.

Study graph

Key Takeaways

Package the pain.

Releasing a whole bunch of bad news in one go is better than drip-feeding it across successive days. Similarly, having four fillings in one go is preferable to spreading them out one a week for a month. Less painful overall with fewer periods of worry. How you Frame pain matters too. Emphasize the short, one-off nature of the discomfort, the Fresh Start and comforting Certainty it will provide.

Takeaway image

Consolidate smaller losses into bigger gains. 

Even small bits of bad news can trigger overweighted negativity. Consider bundling them as part of larger, positive announcements to reduce the pain felt.

Takeaway image

Split off small gains from bigger losses.

What small victories can you hold back and share separately after a big bit of bad news? What small feature can you release separately from a significant security update?

Takeaway image
Takeaway image
Aggregation Effect

Aggregation Effect

Negative experiences feel less painful overall when they’re bundled together

We have an increasing numbness to losses as they mount, so instead of spreading out small pains over time, overall we feel better when they’re consolidated.

The study

Setup

425,744 sales of US shares were analyzed by determining which had gained value and which had lost value. Both groups were further analyzed to determine whether the shares were sold in groups or on their own.

Results

The research found that investors were more likely to sell off losing trades in groups over those which were doing well, so as to ease the pain of loss.

study graph
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In detail

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