Finance:Emotional hedge
An emotional hedge is a psychological and financial strategy used to mitigate potential negative emotions by offsetting a personally significant outcome with a compensatory action.[1] The concept is most commonly applied in sports betting, where an individual places a wager against their favored team.[2] If the team wins, the emotional satisfaction compensates for the financial loss; if the team loses, the financial gain cushions the emotional disappointment.[3][4]
Reluctance
Despite the fact that an emotional hedge guarantees the bettor one positive outcome, it is rarely observed. Optimism bias, in which the probability of a positive outcome is overestimated by an emotionally-driven bettor, plays a part in many people's decision not to make the bet.[5] In sports betting, many are also reluctant to make the bet because they feel that it is disloyal to their favored team.[6]
See also
References
- ↑ Ambrose, Charles (17 May 2023). "Theory of emotional hedging in behavioural finance". https://timesofindia.indiatimes.com/readersblog/charles-ambrose/theory-of-emotional-hedging-in-behavioural-finance-53928/.
- ↑ Millman, Chad (13 January 2010). "The power of the emotional hedge bet". https://www.espn.com/insider/insider/news/story?id=4822664.
- ↑ "The Emotional Hedge Bet". 16 February 2011. https://firstoffthebench.wordpress.com/2011/02/16/a-deeper-look-into-the-emotional-hedge-bet/.
- ↑ Ayello, Jim (29 December 2020). "The emotional hedge bet: What it is and why Colts fans need to place it before Sunday". https://www.indystar.com/story/sports/nfl/colts/colts-insider/2020/12/29/emotional-hedge-bet-what-and-why-colts-fans-need-place/4079495001/.
- ↑ "Emotional Hedge". 2 February 2020. https://www.theunchainedbanker.com/post/emotional-hedge.
- ↑ Morewedge, Carey K. (14 October 2016). "Why You Should Bet Against Your Candidate". https://www.nytimes.com/2016/10/16/opinion/sunday/why-you-should-bet-against-your-candidate.html.
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