Risk-Seeking Behaviour
Preferring an uncertain outcome to a certain one of the same expected value, typically when facing losses.
How it is identified
Test: the gamble is preferred to a certain outcome of equal or higher expected value, usually in the loss domain
Unit
qualitative
In depth
The same person who is risk averse over gains becomes risk seeking over losses, which is prospect theory's central asymmetry and the reason it explains so much investor behaviour. Facing a certain loss, people take gambles they would refuse facing a certain gain — which is why losing positions get doubled down on, and why a trader in drawdown increases size rather than reducing it. This is the psychology behind the largest account blowups, since the behaviour intensifies exactly as capital shrinks. Recognising the loss domain as the trigger is what allows a rule to be applied instead of a feeling.
Worked example
Facing a certain ₹50,000 loss or a coin flip losing ₹1,00,000 or nothing, most people take the flip. The same people offered a certain ₹50,000 gain or a flip for ₹1,00,000 take the certain gain.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Risk-Seeking Behaviour” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.