Despite existing evidence about prospect theory value–stock return (PTV–STR) linkage in several countries, the specific role of loss aversion in this relationship remains unexplored. This article is the first to examine the importance of loss aversion in determining PTV–STR connection. We hypothesize that the PTV–STR relationship is subject to the levels of loss aversion. Using data compiled from 221 Vietnamese stocks between January 2011 and December 2020, we document that when the level of loss aversion is high (low), prospect theory values positively (negatively) affect the stock returns, and the findings’ robustness is observed. Because the attractiveness of stocks can be impacted by the degree of loss aversion, it cannot be neglected in researching whether prospect theory can explain investors’ choices in stock markets.
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