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Prof. Meir Statman and Prof. Hersh Shefrin[Statman and Shefrin] Aversion to losses typically leads people to take chances that they would not in other circumstances. Suppose that you have a choice. You can accept a sure $500 or you can face 50-50 odds that you will either win $1,000 or nothing at all. What would you do if you actually faced this situation? Or suppose that you are in the unfortunate situation where you have lost $500. However, instead of accepting this loss, you can face 50-50 odds that you either lose $1,000 or you lose nothing? What would you do if you actually faced this situation? When asked the two questions above, more than half of our students say they would take the sure $500 instead of taking a chance on winning $1,000. However, more than half of students would take the chance of losing $1,000 instead of accepting a sure loss of $500. Psychologists emphasize that although people generally behave conservatively when it comes to risk, they are much more willing to take risks when they think they might be able to avert a loss. That, in turn, leads to the disposition effect.
[Douglas] "Most of us are not as willing to take financial risks as we think. Most people like to think of themselves as risk takers, but what they really want is a guaranteed outcome with some momentary suspense to make them feel as if the outcome had been in doubt. The momentary suspense adds the thrill factor necessary to keep our lives from getting too boring".
[Greenfinch] "Often, in their portfolio, people, and among them the less experienced, prefer to sell winners than losers (disposition effect). They don't like to sell a stock on which there are losing money. They prefer to keep it, taking the risk that its price will fall even more. Their loss aversion is stronger than their risk aversion or than their urge to seize gain opportunities. Another reason is their reluctance to admit their mistakes or to fail to keep a commitment".
[Hussman] "Risk alone has no necessary relationship with investment return. For instance, you don't get a higher expected return for holding a poorly diversified portfolio, regardless of how risky it is (yes, the range of returns will be wider, but the average return is not correspondingly higher). So when we talk about there being a positive relationship between expected return and risk, we're already assuming that the selection, diversification, and optimization has been done - that is, we already have a portfolio that provides the highest expected return for a given level of risk".

Loss Aversion in Riskless Choice: A Reference-Dependent Model, Tversky and Kahneman, 1991
"Much experimental evidence indicates that choice depends on the status quo or reference level: changes of reference point often lead to reversals of preference. The central assumption of the theory is that losses and disadvantages have greater impact on preferences than gains and advantages".
alternative links to Tversky and Kahneman:
What is Loss Aversion?
Power-Point Summary
The Effect of Myopia and Loss Aversion on Risk Taking: An Experimental Test, Thaler, Schwartz, Kahneman and Tversky, 1997
"Myopic loss aversion is the combination of a greater sensitivity to losses than to gains and a tendency to evaluate outcomes frequently. Two implications of myopic loss aversion are tested experimentally. 1. Investors who display myopic loss aversion will be more willing to accept risks if they evaluate their investments less often. 2. If all payoffs are increased enough to eliminate losses, investors will accept more risk. In a task in which investors learn from experience, both predictions are supported. The investors who got the most frequent feedback (and thus the most information) took the least risk and earned the least money".
Myopic Loss Aversion and the Equity Premium Puzzle, Ben-artzi and Thaler, 1995
Prof. Shlomo Ben-artzi"The equity premium puzzle, first documented by Mehra and Prescott, refers to the empirical fact that stocks have greatly outperformed bonds over the last century. As Mehra and Prescott point out, it appears difficult to explain the magnitude of the equity premium within the usual economics paradigm because the level of risk aversion necessary to justify such a large premium is implausibly large. We offer a new explanation based on Kahneman and Tversky's 'prospect theory'. The explanation has two components. First, investors are assumed to be 'loss averse' meaning they are distinctly more sensitive to losses than to gains. Second, investors are assumed to evaluate their portfolios frequently, even if they have long-term investment goals such as saving for retirement or managing a pension plan. We dub this combination 'myopic loss aversion'. Using simulations we find that the size of the equity premium is consistent with the previously estimated parameters of prospect theory if investors evaluate their portfolios annually. That is, investors appear to choose portfolios as if they were operating with a time horizon of about one year. The same approach is then used to study the size effect. Preliminary results suggest that myopic loss aversion may also have some explanatory power for this anomaly".
Do Professional Traders Exhibit Myopic Loss Aversion? An Experimental Analysis, Haigh and List, 2005
Myopic loss aversion (MLA) tendencies may be attenuated among professionals. Using traders recruited from the CBOT, we do indeed find behavioral differences between professionals and students, but rather than discovering that the anomaly is muted, we find that traders exhibit behavior consistent with MLA to a greater extent than students.
Do Professional Traders Exhibit Loss Realization Aversion, Locke and Mann, 2000
"In this paper we examine trades by populations of professional futures traders for evidence of activity best described by the "behavioral finance" literature. The data provide support for the existence of a disposition effect (derived from the prospect theory of Kahneman and Tversky 1979) among professional traders. We find that traders hold losing trades longer than winning trades and that average position sizes for losing trades are larger than for winners. Our evidence also indicates that relative aversion to loss realization is related to contemporaneous and future trader relative success".
What Makes Investors Trade?, Grinblatt and Keloharju, 2001
"We find evidence that investors are reluctant to realize losses, that they engage in tax-loss selling activity, and that past returns and historical price patterns, such as being at a monthly high or low, affect trading".
Why Stocks May Disappoint, Ang, Bekaert and Liu, 2000
Do Behavioral Biases Affect Prices?, Coval and Shumway, 2001
"This paper documents strong evidence of behavioral biases among Chicago Board of Trade proprietary traders and investigates the effect these biases have on prices. Our traders appear highly loss-averse".
Information Asymmetry, Price Momentum, and the Disposition Effect, STROBL, 2003
"Specifically, we show (i) that disposition effects arise quite naturally in a world with changing information asymmetry, (ii) that existing empirical tests rejecting an information-based explanation are inconclusive, and (iii) that disposition effects are consistent with price momentum".