What is the general range of the Loss Aversion ratio?

The Loss Aversion ratio, a concept rooted in behavioral finance, generally measures the degree to which losses are felt more intensely than gains of the same size. Typically, research in this area suggests that human beings experience losses roughly 1.5 to 2.5 times more intensely than equivalent gains. This range indicates that people are more motivated to avoid losses than to pursue gains, showcasing a fundamental bias in decision-making and risk assessment.

The rationale for choosing the range of 1.5 to 2.5 is supported by psychological studies that have quantitatively assessed the disparity in psychological impacts between gains and losses. This phenomenon has implications for investor behavior and market movements, as investors often become risk-averse during downturns due to the significant weight they place on potential losses relative to potential gains.

The other ranges presented fall outside of the commonly observed effects documented in psychological studies of loss aversion, as they either exaggerate or underestimate the ratio's typical range. Therefore, the chosen answer accurately reflects a foundational principle in behavioral finance concerning risk and loss sensitivity in human psychology.